Identity, Information and Situations

Abstract

This paper introduces a model of individual behavior based on identity, a person’s sense of self. The individual evaluates situations, i.e., sets of available actions given a belief about the actions’ uncertain payoffs. In some situations, a psychological cost arises because the individual’s identity prescribes an action that differs from the one maximizing material benefits. The model shows that a common process of weighing psychological costs and material benefits drives the choice of both information and future opportunities. As a result, information avoidance is akin to preferring fewer opportunities, such as crossing the street to avoid a fundraiser. The model provides a coherent rationalization for diverse behaviors, including willful ignorance, opting out of social dilemmas, and excess entry into competitive environments. The psychological cost varies non-monotonically with the quality of information or with having more opportunities. Non-monotonicity complicates the identification of prescriptions from behavior, a difficulty that is partially resolvable by observing specific choices.