Research

We study in the lab how choosing one of two products affects beliefs about their qualities. In a between-subject design, we randomize both ownership mode (choice vs. assignment) and whether a product appears favorable by pairing it with an objectively better or worse alternative. This design allows us to estimate the causal effect of choice on the perceived quality gap, as we can factor out contrast effects and instrument choice with optimal choice. We find that choosing magnifies the belief gap between the owned and unowned alternative, and it is driven almost entirely by newly formed downwardly distorted beliefs about rejected options. Additionally, prompting participants to focus more on product qualities before making their choice attenuates the choice effect, suggesting that attention is an important driver. The choice effect explains several empirical observations and provides support for active choice policies over opt-out defaults.

Overconfidence - overestimating one’s own performance or underestimating others' performance advantage - is pervasive in economic decision-making, generating substantial inefficiencies. We show that overconfidence can arise - or be exacerbated - because of a decision problem itself. In organizational settings, delegation decisions are ubiquitous and inherently require decision makers to choose whether the outcome depends on their own performance or on another person’s performance. We propose and test in a lab-experiment that this self-reliance dilemma induces motivated reasoning about relative performance, thereby contributing to overconfidence. Participants perform a real effort task and decide whether to get paid based on their own past performance or on another person’s past performance. This decision is always made at the end of the experiment and without feedback on true performances. However, we vary whether participants learn about this self-reliance dilemma before or after reporting beliefs. Participants who learn about the self-reliance dilemma before reporting beliefs report a smaller performance advantage of the counterpart and are more likely to believe, incorrectly, that they outperformed their counterpart. These belief distortions arise even though the self-reliance decision itself is unaffected. Our findings identify a novel and economically relevant source of overconfidence with implications for organizational design, showing that self-reliance dilemmas can foster biased beliefs and overconfidence that may shape future decisions

After purchasing a product, people usually receive information and update their beliefs about both chosen and non-chosen products. This, in turn, can affect future buying and selling decisions. In this paper, we study how choosing a product affects learning about products after the choice has been made. We design an experiment where participants learn about the fundamental quality of financial investments by observing price changes in multiple rounds. Using a between-subject design, we compare beliefs of participants who choose some of the investments themselves (Choice condition) to participants who receive investments exogenously (Allocation condition). We find that learning is stickier after making a choice: participants respond less to price changes in the Choice condition than in the Allocation condition. This result holds for both own and non-owned investments and for both good news and bad news. We also show that participants in the Choice condition do not pay more attention to the investments; neither when they choose, nor after they have made the choice. We estimate a structural model and demonstrate that learning is not significantly different from the Bayesian benchmark after exogenous product allocation, while it is too sticky after making a choice.

I investigate whether people distort beliefs about third parties – such as the ability of scientists to offset one’s environmental impact – to excuse self interested behavior. In a laboratory experiment, participants choose how much money to take. The money is either taken from passive participants or comes from another source. Which one it is depends on the success of a third party in solving a riddle. I use a between-subject design with two treatment conditions that only differ in whether it is the success or the failure that results in taking the chosen amount from passive participants. After choosing the amount, participants report beliefs about the success of the third party. Indeed, beliefs are 13 percentage points higher when it is the failure that results in taking the chosen amount from passive participants. With monetary incentives for correct guesses the inference is inconclusive. Nevertheless, the difference in beliefs decreases to 6 percentage points and becomes statistically insignificant. The results suggest that people use belief-based excuses about third-party success. 

This is a registered report. In two experiments, we aim to demonstrate that meritocratic illusion emerges in spectators' sequential redistributive choices.  

Choices we make are often informative about our moral character. People do not interpret their choices in isolation; rather, they contextualize them within narratives comprising stories about others’ moral actions and characters. In this paper, we model decision problems wherein agents care about their self-image and — in addition to choosing their actions — they choose their beliefs about others’ behavior in a flexible way. We establish a hypothesis testing equilibrium (HTE) in which agents can hold self-serving beliefs about others’ behavior, provided these beliefs are both rationalizable and sufficiently plausible based on the information available to them. We show that in the absence of full information about others’ behavior, agents can excuse self-interested behavior and acclaim moral behavior in equilibrium. Under conditions of full information, HTE coincides with the classical self-signaling equilibrium with agents having accurate beliefs. We analyze how increased visibility of behavior in the society affects overall morality and show that it is detrimental when saints (high moral types) are praised, whereas it is desirable when sinners (low moral types) are punished.

Jury decisions and hiring decisions by company boards are just some examples of sequential public voting where members might care to look similar in their preferences to other members. We argue that such social-image concerns can result in inefficiencies where even the majority voting rule doesn’t necessarily select the majority preferred option. We model binary decisions in three-member groups with public and sequential votes aggregated using the majority rule. Each member is randomly drawn from the population and has a private binary type which is her individually preferred decision. One of the members may have image concerns that compel her to vote differently than her type. We show that when the proportion of types in the population is close to equal, then this member is more likely to vote against her own type if she votes second than if she votes first. This ranking, however, can flip if the population share of the majority type is close to 1. That is, simultaneous voting can be worse than sequential voting.

We analyze the consequences of managers' health shocks on their employee pool. Drawing on literature in psychology, we hypothesize that a division leader's previous illness experience may affect their attitudes towards their employees. Using Hungarian administrative linked employer-employee panel data and an event-study approach combined with matching, we compare the separation rate of employees assigned to managers before and after the managers' illness episodes. We find that the separation rate increases by 8% after a manager's illness episode, predominantly driven by dismissals rather than voluntary departures. Since illness experience does not significantly affect the overall number of employees, this suggests that the organizational change is characterized by restructuring rather than downsizing, further supporting our hypothesis. Given that such workplace dynamics can be costly for the firm, and dismissals often harm employee well-being and future employment prospects, our findings have important financial and welfare implications.