The Dynamics of Motivated Beliefs

Abstract:

Motivated reasoning and self-deception are prevalent in many contexts of economic relevance. A key question is how motivated beliefs are sustained in the presence of feedback. In this paper, we explore dynamic motivated belief patterns after feedback. We establish that positive feedback has a persistent effect on beliefs. Negative feedback, instead, moves beliefs in the short-run, but this effect fades over time. We investigate the mechanisms of this dynamic pattern, and provide evidence for an asymmetry in the recall of feedback. Finally, we establish that, in line with theoretical accounts, incentives for belief accuracy mitigate the role of motivated reasoning.