Projective Thinking: Model, Evidence, and Applications

64 Pages Posted: 18 Jun 2023 Last revised: 14 May 2024

See all articles by Kristof Madarasz

Kristof Madarasz

London School of Economics & Political Science (LSE)

David Danz

University of Pittsburgh - Department of Economics

Stephanie Wang

University of Pittsburgh

Date Written: May 31, 2023

Abstract

We develop a parsimonious but fully portable model of limited perspective taking for Bayesian games. We postulate an empirically tight link between the extent to which people project onto others and the extent to which they simultaneously anticipate but underestimate others’ projection onto them. After providing direct experimental evidence for such projective thinking, we explore several implications of the model. When dissent in front of a loyalist is costly, people who oppose a rule are too shy to speak up, but both proponents and opponents of the rule too often infer that others have antagonistic preferences. An increase in the cost of dissent increases people’s perception of the fraction of others who genuinely support the rule, and arbitrarily unpopular rules will come to be perceived by everyone as genuinely supported by the majority even as speech becomes almost free. In common-value trade, sellers underbluff, buyers are cursed, and the model predictions closely match existing data.

Keywords: Perspective Taking, Theory of Mind, The Biases of Others, False Polarization, Social Obedience, Underbluffing, Winner’s Curse, Common-value Trade

JEL Classification: C92, D80, D91

Suggested Citation

Madarasz, Kristof and Danz, David and Wang, Stephanie, Projective Thinking: Model, Evidence, and Applications (May 31, 2023). Available at SSRN: https://ssrn.com/abstract=4480657 or http://dx.doi.org/10.2139/ssrn.4480657

Kristof Madarasz

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

David Danz

University of Pittsburgh - Department of Economics ( email )

4901 Wesley Posvar Hall
230 South Bouquet Street
Pittsburgh, PA 15260
United States

Stephanie Wang (Contact Author)

University of Pittsburgh ( email )

135 N Bellefield Ave
Pittsburgh, PA 15260
United States

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