Many observations from psychology, political science, and organizational behavior indicate that people exhibit a taste for consistency. Individuals are inclined to interpret new evidence in ways that confirm their pre-existing beliefs. They also tend to change their beliefs to enhance the desirability of their past actions. The current paper explores the implications of a simple model incorporating these effects into an agent’s utility function. The model allows a characterization of when: 1. agents become under- and over-confident, 2. agents prefer less accurate signals, i.e., they are willing to pay in order to forgo information, and 3. agents exhibit excess stickiness or excess volatility in action choices.
Stored only when both papers are in the corpus — 71 citations exist upstream.