Essays in Behavioral Economics

Abstract

This dissertation presents three chapters revolving around the common theme ‘motivated reasoning.’ Motivated reasoning occurs when individuals tradeoff accurate beliefs and desirable beliefs (Bénabou and Tirole, 2016). Across various contexts, two research questions are at the core of the research on this topic: first, why would people desire certain beliefs? Second, by what means do they gain and maintain the views that they like? Understanding these questions would help us to gain a better idea about not only what drives beliefs, but also how beliefs affect decisions.<br /> In this dissertation, I present my experimental and theoretical research on motivated beliefs.<br /> In Chapter 1, I present experimental evidence that higher confidence leads to higher effort provision. This finding offers empirical evidence for various models involving this motivational value of confidence. It also points out boosting self-confidence as a way to motivate effort in workplace.<br /> In Chapter 2, I present a theoretical analysis of the information acquisition strategy of an agent who values not only her material well-being but also her belief in the innocuousness of her decision. The main result of the model is that the agent’s optimal information signal cannot be more likely to show evidence against the innocuousness of the self-benefiting action, i.e., it cannot be positively skewed. This result also extends to a dynamic setting where the agent has access to continuous information flow and can decide when to stop acquiring information. We also show that the information acquisition strategy, motivated by the selfish desire for material benefits, can reduce the negative externalities imposed by the agent’s decision.<br /> In Chapter 3, I present an experimental investigation of the dynamics of information acquisition in decisions where gaining benefits might harm others. I compare it to the information acquisition in decisions where people gain no benefits. The data show that in the former when most information has been against the innocuousness of the gainful action, more decision makers continue acquiring information, and vice versa. We also show in our data that this information acquisition strategy improves the welfare of the receiver, as predicted possible by the model in Chapter 2.<br /> This dissertation contributes to the evidence that biased beliefs can sometimes be beneficial. Specifically, a rosy self-view can boost motivation. It also shows that one way to cultivate desirable beliefs is by acquiring information strategically. These beliefs, in turn, affect decisions like the effort exertion in a task or the decision to undertake a self-benefiting action. This dissertation joins research on motivated beliefs. It contributes to better understanding the strategic formation of beliefs, the psychological reasons behind people’s desire for certain beliefs, and how they affect peoples’ decisions.