We analyze the value placed by rational agents on self-confidence, and the strategies employed in its pursuit. Confidence in one's abilities generally enhances motivation, making it a valuable asset for individuals with imperfect willpower. This demand for self-serving beliefs (which can also arise from hedonic or signaling motives) must be weighed against the risks of overconfidence. On the supply side, we develop a model of self-deception through endogenous memory that reconciles the motivated and rational features of human cognition. The resulting intrapersonal game of strategic communication typically leads to multiple equilibria. While “positive thinking” can improve welfare, it can also be self-defeating (and nonetheless pursued).
Stored only when both papers are in the corpus — 1,549 citations exist upstream.