Motivated Beliefs, Independence and Cooperation

Abstract

Humans are social beings but sometimes stay alone. This paper theoretically investigates the connection between an intraperson game and an interperson interaction. Motivated beliefs supplied from memory management due to present bias in the individual investment problem yields positive spillovers on others through social interactions. This suggests that frequent social interactions may reduce an individual’s inclination to cooperate, exacerbating the free-riding problem. Additionally, the paper establishes a positive correlation between overconfidence and prosocial attitudes, both of which may emerge and persist through life experiences. Evidence from cross-country psychological surveys at the country level and an online experiment at the individual level largely aligns with our theoretical implications.