Willful Ignorance and Reference-Dependence of Self-Image Concerns

Abstract

Self-image concerns play a crucial role in economic decision-making. I conduct a laboratory experiment and offer a theoretical framework to examine whether self-image concerns are reference-dependent and whether individuals react differently to gains and losses in selfimage. I focus on intelligence, a self-image-relevant domain, and find that individuals update their beliefs about performance more strongly if they experience losses than gains in selfimage. On average, individuals tend to avoid self-image-relevant feedback in case of gains and losses in self-image. However, the willingness to acquire self-image-relevant feedback increases if the difference between the posterior and the prior beliefs about performance increases.