A Model of Moral Balancing under Motivated Reasoning

Abstract

While there is abundant empirical evidence of individuals switching between selfish and prosocial behavior, few economic models formalize these findings. This paper presents a novel model that jointly analyzes two key concepts for understanding prosocial behavior: moral balancing and motivated reasoning. Individuals maximize their material utility under the constraint of maintaining a minimum level of self-image (moral balancing), where self-image depends on signals extracted from past behavior. The processing of these signals is biased toward arriving at a positive self-image (motivated reasoning). The time horizon for which the self-image constraint is binding depends on individuals' intrinsic motivation and their awareness of self-image-relevant choices. Selfish behavior is higher when the constraint is only binding in the long term and the influence of motivated reasoning on behavior is contingent on whether individuals are aware of their inclination toward motivated reasoning. The results suggest that voluntary prosocial behavior is unlikely to be sustained and, thus, call for adequate policy measures to incentivize prosocial behavior.

Keywords: Behavioral economics, theoretical model, moral balancing, motivated reasoning, self-signaling

JEL Classification: D62, D91