Projective Thinking: Model, Evidence, and Applications

We offer a parsimonious model of egocentric thinking by postulating a link between the extent to which people project their beliefs onto others and to which they anticipate others’ projecting onto them. We provide evidence for this link in higher-order beliefs and derive predictions of such projective thinking. In torts, judges’ excessive liability judgments are conjoint with agents’ under-appreciation thereof. In dissent, people infer antagonistic preferences and the more costly dissent is, the more they conclude that the norm is genuinely popular. In trade, informed traders bluff too little, uninformed ones are cursed, and the predictions match the experimental evidence.

Keywords: Higher-order Beliefs, False Consensus and Pluralistic Ignorance, Free Speech, Intergroup Contact, Trade, Winner's Curse, Bluffing

JEL Classification: C92, D80, D91

Suggested Citation: 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