Award of the Schmölders Foundation 2022

The Chapter for Social Science of the VfS awards the prize of the Schmölders-Stiftung 2022 to:

Christoph Drobner: „Motivated Beliefs and Anticipation of Uncertainty Resolution“, AER: Insights 4(1), 1-17, 2022.

In his study, Christoph Drobner explains an apparent contradiction in the literature on biased belief updating of ego-relevant information. Part of the literature, rather in psychology, finds that people show an optimistic bias in belief updating in over-weighting positive information. Other studies, mostly from economics, find pessimistic biases, where negative information is over-weighted. Mr. Drobner convincingly argues that the studies differ systematically regarding when uncertainty is resolved. Studies in psychology often investigate long-term events, whereas studies in economics often investigate questions such as performance tests, where feedback is often provided within the experiment. He argues based on theoretical models, that utility is only derived from optimistic expectations when resolution of uncertainty is not expected in the near future. In a carefully designed laboratory experiment he confirms the hypothesis that an optimistic bias only appears when no resolution of uncertainty is expected. Experimental participants obtain noisy information on an IQ-test and are asked about their expected rank both before and after obtaining this information. In a treatment in which the participants know that they will at the end of the experiment learn their true rank, there is no optimistic bias in the belief updating. In an otherwise identical treatment, in which it is made clear that no information about the true rank will be provided, belief updating is optimistically biased. With his study Mr. Drober excellently contributes to the understanding of the literature on biased processing of ego-relevant information.