Identity and economic incentives

Arbeitspapier

This paper examines how beliefs and preferences drive identity-conforming consumption or investments. We introduce a theory that explains how identity distorts individuals' beliefs about potential outcomes and imposes psychic costs on benefiting from identity-incongruent sources. We substantiate our theoretical foundation through two lab-in-field experiments on soccer betting in Kenya and the UK, where participants either had established affiliations with the teams involved or assumed a neutral stance. The results indicate that soccer fans have overoptimistic beliefs about match outcomes that align with their identity and bet significantly higher amounts on those than on outcomes of comparable games where they are neutral. After accounting for individuals' beliefs and risk preferences, our structural estimates reveal that participants undervalue gains from identity-incongruent assets by 9% to 27%. Our counterfactual simulations imply that identity-specific beliefs account for 30% to 44% of the investment differences between neutral observers and supporters, with the remainder being due to identity preferences.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ECONtribute Discussion Paper ; No. 269

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Behavioral Finance: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets‡ ; Cultural Economics; Economic Sociology; Economic Anthropology: General
• Thema: Identity ; Experiment ; Structural Analysis

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Donkor, Kwabena ; Götte, Lorenz ; Müller, Maximilian ; Dimant, Eugen ; Kurschilgen, Michael
• Ereignis: Veröffentlichung
• (wer): University of Bonn and University of Cologne, Reinhard Selten Institute (RSI)
• (wo): Bonn and Cologne
• (wann): 2023

Weitere Informationen

• Handle: http://hdl.handle.net/10419/283311
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ