I propose a belief updating framework that accommodates both confirmation bias and motivated reasoning. The updating process is characterized by three intuitive axioms. I extensively discuss the properties of the model, as well as the equivalent interpretations of the model. The model extends the discussion of confirmation bias beyond binary states, and I propose a natural extension to determining which states and signals are confirmatory. The model can account for several well-known phenomena, such as the significance of first impressions, the polarization of beliefs, and the perseverance of inaccurate beliefs. I note how confirmation bias and motivated reasoning give rise to different belief dynamics.

Digital platforms may manipulate the customer reviews to impede the consumers’ abilities of acquiring accurate information and to increase sales. In a rational inattention setting where consumers acquire information on the good’s quality before making purchasing decisions, we show that the platform has incentives to restrict information acquisition in the presence of consumers with wishful thinking. These biased consumers are unaware of their bias and weigh any good news about the product quality more heavily than a Bayesian consumer. We identify the conditions for which the firm optimally constrains information acquisition, and characterize when competition can alleviate this type of exploitation. Our results extend to a class of other non-Bayesian rules beyond wishful thinking.

Previous experiments have provided evidence for motivated and unmotivated confirmation bias individually, but never discussed the possibility that the two can occur together in depth. This paper presents one of the first experiments that examines both forms of confirmation bias together. Subjects were asked to update their beliefs regarding both politically contextualized questions and neutral questions. Subjects exhibited both motivated and unmotivated confirmation bias, but there was also significant heterogeneity among them. Notably, motivated confirmation bias is significantly stronger in later rounds of the experimental tasks, which may be correlated with the shorter response times in the later rounds.

People tend to spend more time making decisions when it is less clear to them which option is better. As such, other people might use decision time to infer personal preferences. We conduct an experiment to test ifs outside observer will base their judgement of a decision maker's prosocial tendencies on decision time in addition to choice, and whether the decision maker will anticipate this and strategically manipulate their decision time to promote their social image.