A Dynamic Model of Decision-making Under Cognitive Dissonance and Modularity of Mind

Abstract

This paper attempts to explain how and why seemingly contradictory beliefs co-exist in an optimizing individual''s mind in the long run. We set up a dynamic model of decision-making inwhich the individual.s mind is composed of a coordinating principal and two conflicting agents. We take into account the cognitive dissonance experienced due to the conflict between the agents. Each agent (or self ) is specialized in perceiving a particular type of signal, which describes the world. Cognitive dissonance levels in our model are not constant. Instead, the individual''s split-selves are open to habituation, which can lead to a reduction in cognitive dissonance. We prove the existence of an optimal strategy with a threshold structure. Our results show that the co-existence of conflicting beliefs might be an equilibrium phenomenon even in an optimizing mind. Suggestions that may avoid the tension that occurs due to cognitive dissonance are made.microeconomics ;