TY  - RPRT
        AU  - Drobner, Christoph
AU  - Goerg, Sebastian J.
        TI  - Motivated Belief Updating and Rationalization of Information
        PY  - 2022/Oct/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 15682
        UR  - https://www.iza.org/index.php/publications/dp15682
        AB  - We study belief updating about relative performance in an ego-relevant task. Manipulating the perceived ego-relevance of the task, we show that subjects update their beliefs optimistically because they derive direct utility flows from holding positive beliefs. This finding provides a behavioral explanation why and how overconfidence can evolve in the presence of objective information. Moreover, we document that subjects, who received more bad signals, downplay the ego-relevance of the task. Taken together, these findings suggest that subjects use two alternative strategies to protect their ego when presented with objective information.
        KW  - motivated beliefs
KW  - optimistic belief updating
KW  - overconfidence
KW  - direct belief utility
KW  - Bayes' rule
KW  - ex-post rationalization
        ER  -