Utility When There Is a Preference for Beliefs: a Behavioral Model of Political Conflict

We consider the case where individuals derive utility from feeling good about themselves and their group, but where the satisfaction of such preferences may come at a cost. In other contexts, what people want to believe is considered irrational, but in our model, these are preferences like any other. Equilibrium subjective beliefs concerning whether one’s group has acted appropriately are endogenous to the model. We look at the various factors that influence the spread between objective and subjective reality. We also consider a conflict situation between two groups. We show that because of their subjective beliefs, one or both sides may engage in counter-productive activity (when seen from a third party perspective); and even if this is not the case, learning is likely to be slower than what one would expect from the standard utility function.