Motivated Beliefs, Independence and Cooperation

Abstract

Humans are social animals but sometimes stay alone. The paper 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 give rise to a positive spillover on others through social interactions. Our result establishes a positive relationship between overconfidence and prosocial behaviors and suggests that a high frequency of social interactions reduces an individual's tendency to cooperate with others, exacerbating the freeriding problem. Our empirical finding shows that people in countries with indulgent cultures tend to be more confident in terms of Rosenberg's self-competence score, individuals living in countries with a high population density or an extended family system appear less confident, and those in countries with high self-competence scores are more agreeable in Big Five personality traits, largely supporting our model's implications.

Keywords: motivated beliefs, self-confidence, present bias, cooperation, cultural difference

JEL Classification: D01, D91, O57, Z10