Periodic Reporting for period 2 - MOREV (Motivated Reading of Evidence)
Periodo di rendicontazione: 2021-08-01 al 2023-01-31
In most economic and social contexts, agents base their decisions (to purchase, to invest, to accept a job offer, etc.) on available information. This information can take various forms: it can be verifiable or not, it can provide hard evidence of a fact or simply be a friend’s advice or recommendation. But whatever form information takes, one assumption guides its use in most economic models: agents, who initially lack information, seek to obtain the most accurate depiction of the context in which they evolve. In other words, agents’ main objective is to discover the true “state of the world” (a microeconomics concept that summarizes the uncertainty of the environment). In the ERC MOREV project, I propose to challenge this assumption: what if economic agents actually do not always want to know the truth about their environment? In other words, the idea is to consider that agents can form “motivated beliefs”, that is, beliefs that serve a personal objective which is potentially more complex than the one of holding accurate beliefs.
Like behavioural economics in general, the topic of motivated beliefs has been receiving increasing interest in economics for the past few years now. This interest was initially motivated by the observation that individuals always view themselves as better than the average population (in better health, with a smaller chance to divorce, as a more careful driver etc.), a belief which is necessarily wrong. In previous works, motivated beliefs are about personal characteristics of the individual: his intelligence, his generosity, his health status. In this project, i wish to study how economic agents form beliefs about other individuals and about their economic environment more generally. Do we perceive others in the same way when we are about to compete against them or about to work with them? Which dimensions of a person’s identity do we have in mind in different strategic settings? Which avoidance strategies do consumers use not to learn that some products are polluting the planet? Do they avoid reading the labels, avoid reasoning about these labels or deliberately forget what they learnt? To try to answer these questions, I will use experimental methods as well as theoretical models.
According to “classical” economic theory, a decision-maker should never avoid information because it helps him make better choices. It is therefore particularly surprising that in forming motivated beliefs, individuals sometimes avoid available information. It follows that public policies which rely on the mandatory disclosure of information – on the risks of some products for health or for the environment, on the methods of data protection etc. – may not be as efficient as one may think. When agents do not want to know, how should they be informed? And should we be informing them at all?
Like behavioural economics in general, the topic of motivated beliefs has been receiving increasing interest in economics for the past few years now. This interest was initially motivated by the observation that individuals always view themselves as better than the average population (in better health, with a smaller chance to divorce, as a more careful driver etc.), a belief which is necessarily wrong. In previous works, motivated beliefs are about personal characteristics of the individual: his intelligence, his generosity, his health status. In this project, i wish to study how economic agents form beliefs about other individuals and about their economic environment more generally. Do we perceive others in the same way when we are about to compete against them or about to work with them? Which dimensions of a person’s identity do we have in mind in different strategic settings? Which avoidance strategies do consumers use not to learn that some products are polluting the planet? Do they avoid reading the labels, avoid reasoning about these labels or deliberately forget what they learnt? To try to answer these questions, I will use experimental methods as well as theoretical models.
According to “classical” economic theory, a decision-maker should never avoid information because it helps him make better choices. It is therefore particularly surprising that in forming motivated beliefs, individuals sometimes avoid available information. It follows that public policies which rely on the mandatory disclosure of information – on the risks of some products for health or for the environment, on the methods of data protection etc. – may not be as efficient as one may think. When agents do not want to know, how should they be informed? And should we be informing them at all?
The project belongs to the area of behavioral economics. The objective of the project is to investigate when and how agents read evidence in a motivated way, that is, in a way that help them form and keep the beliefs they prefer. The project consists of two parts, which each include the running of experiments and the writing of theoretical models.
In the first part, the goal is to investigate how agents read evidence about other individuals, taking the study of motivated beliefs to the social realm. In this part, i followed the plan proposed. The main output for this part is the experiment i have run with Rachel Kranton, described below.
- “Competition, Cooperation and Social Perceptions", written with Rachel Kranton.
Abstract: Many empirical and experimental studies show that social divisions negatively impact economic outcomes. This experiment reverses the causal arrow and asks if the economic setting affects individuals' social perceptions. Subjects receive information about counterparts' preferences and demographics and then work for bonus pay by completing a real-effort task. Subjects who compete against their counterparts report having less in common with their counterparts than subjects in a cooperative setting. This effect emerges despite monetary incentives to report correctly the number of traits in common. The economic setting has little effect on the less precise evaluation of similarity to counterparts.
In the second part, the goal is to investigate how agents make strategic inferences about hard information so as to reach the conclusion they prefer, in particular about the products they consume. By doing so, the idea is to connect the literature on strategic disclosure games to the literature on motivated beliefs. I have managed to connect this literatures as announced in the two outputs described below.
- "Selective Memory of a Psychological Agent", written with Frédéric Koessler and published in European Economic Review (2022).
Abstract: We consider a single psychological agent whose utility depends on his action, the state of the world, and the belief he holds about that state. The agent is initially informed about the state and decides whether to memorize it, otherwise he has no recall. We model the memorization process by a multi-self game in which the privately-informed first self voluntarily discloses information to the second self, who has identical preferences and acts upon the disclosed information. We show that, for broad categories of psychological utility functions, there exists an equilibrium in which every state is voluntarily memorized. In contrast, if there are exogenous failures in the memorization process, the agent always memorizes states selectively. In this case, we characterize the partially informative equilibria for common classes of psychological utilities.
- “Motivated Skepticism”, written with Charlotte Saucet, CEPR working paper.
Abstract: We experimentally study how individuals read strategically-transmitted information when they have preferences over what they will learn. Subjects play disclosure games in which Receivers should interpret messages skeptically. We vary whether the state that Senders communicate about is ego-relevant or neutral for Receivers, and whether skeptical beliefs are aligned or not with what Receivers prefer believing. Skepticism is lower when skeptical beliefs are self-threatening than in neutral settings. When skeptical beliefs are self-serving, skepticism is not enhanced compared to neutral settings. These results demonstrate that individuals' exercise of skepticism depends on the conclusions of skeptical inferences.
In the first part, the goal is to investigate how agents read evidence about other individuals, taking the study of motivated beliefs to the social realm. In this part, i followed the plan proposed. The main output for this part is the experiment i have run with Rachel Kranton, described below.
- “Competition, Cooperation and Social Perceptions", written with Rachel Kranton.
Abstract: Many empirical and experimental studies show that social divisions negatively impact economic outcomes. This experiment reverses the causal arrow and asks if the economic setting affects individuals' social perceptions. Subjects receive information about counterparts' preferences and demographics and then work for bonus pay by completing a real-effort task. Subjects who compete against their counterparts report having less in common with their counterparts than subjects in a cooperative setting. This effect emerges despite monetary incentives to report correctly the number of traits in common. The economic setting has little effect on the less precise evaluation of similarity to counterparts.
In the second part, the goal is to investigate how agents make strategic inferences about hard information so as to reach the conclusion they prefer, in particular about the products they consume. By doing so, the idea is to connect the literature on strategic disclosure games to the literature on motivated beliefs. I have managed to connect this literatures as announced in the two outputs described below.
- "Selective Memory of a Psychological Agent", written with Frédéric Koessler and published in European Economic Review (2022).
Abstract: We consider a single psychological agent whose utility depends on his action, the state of the world, and the belief he holds about that state. The agent is initially informed about the state and decides whether to memorize it, otherwise he has no recall. We model the memorization process by a multi-self game in which the privately-informed first self voluntarily discloses information to the second self, who has identical preferences and acts upon the disclosed information. We show that, for broad categories of psychological utility functions, there exists an equilibrium in which every state is voluntarily memorized. In contrast, if there are exogenous failures in the memorization process, the agent always memorizes states selectively. In this case, we characterize the partially informative equilibria for common classes of psychological utilities.
- “Motivated Skepticism”, written with Charlotte Saucet, CEPR working paper.
Abstract: We experimentally study how individuals read strategically-transmitted information when they have preferences over what they will learn. Subjects play disclosure games in which Receivers should interpret messages skeptically. We vary whether the state that Senders communicate about is ego-relevant or neutral for Receivers, and whether skeptical beliefs are aligned or not with what Receivers prefer believing. Skepticism is lower when skeptical beliefs are self-threatening than in neutral settings. When skeptical beliefs are self-serving, skepticism is not enhanced compared to neutral settings. These results demonstrate that individuals' exercise of skepticism depends on the conclusions of skeptical inferences.
I hope to advance our understanding of when and how economic agents read information in a motivated way.