Rational Irrationality as a Habit: A Dynamic Approach Towards Belief Formation [Rohác]
Dalibor Rohác
George Mason University
In this paper, we present a dynamic model of rational irrationality, which explains how individuals choose their optimal paths of beliefs and how these respond to changes in underlying choice parameters. Our model extends the literature on cognitive dissonance, self deception and rational irrationality by providing a spatial model of formation of beliefs. This setting is used as basis for a dynamic model which depicts false beliefs as a habit. Habit formation in beliefs can be explained in terms of selective memory management. When irrational beliefs are habit-forming, then a nonconvexity in choice of optimal path of beliefs arises. New implications of our work include the conclusion that when dissonance between ones desired belief and the state of the world exists, the individual will be forced to adopt the realistic belief if the wedge between the two is large enough. More importantly, our model predicts that individuals will always choose either sticking to a realistic perception of the world or succumbing entirely to their irrational belief.
File: Rohac-RationalIrrationality-10-21-07.pdf [220.47KB]
Published 11/02/2007
Filed under: (2007), *rohac, @asrec'07, cognitive dissonance, habit formation, rational irrationality