Self-deceptive decision making: normative and descriptive insights

Computational modeling of human belief maintenance and decision-making processes has become increasingly important for a wide range of applications. We present a framework for modeling the psychological phenomenon of selfdeception in a decision-theoretic framework. Specifically, we model the self-deceptive behavior of wishful thinking as a psychological bias towards the belief in a particularly desirable situation or state. By leveraging the structures and axioms of Expected Utility (EU) Theory we are able to operationalize both the determination and the application of the desired belief state with respect to the decision-making process of expected utility maximization. While we categorize our framework as a descriptive model of human decision making, we show that in certain circumstances the realized expected utility of an action biased by wishful thinking can exceed that of an action motivated purely by the maximization of perceived expected utility. Finally, we show that our framework of self-deception and wishful thinking has the descriptive flexibility to account for the inconsistencies highlighted by the Common Ratio Effect and the Allais Paradox.