Motivated Belief Updating and Rationalization of Information

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 about relative performance more optimistically as direct belief utility increases. This finding provides clean evidence for the optimistic belief updating hypothesis and supports theoretical models with direct belief utility. 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.     «

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 about relative performance more optimistically as direct belief utility increases. This finding provides clean evidence for the optimistic belief updating hypothesis and supports theoretical models with direct belief utility. Moreover, we document that subjects, who received more bad signals, downplay the ego-relevance of th...     »