CeDEx Seminar - Alain Cohn (University of Michigan)

Motivated Optimism and Workplace Risk

Abstract:
We provide field evidence that individuals engage in motivated optimism in the face of impending risk. Congruent with a dynamic anticipatory utility model, we demonstrate that belief distortions are time- and stake-dependent. Our study leverages exogenous variation in when people are required to return to their workplaces during the COVID-19 pandemic. Individuals temporally closer to returning to their workplace are relatively more optimistic about the increase in infection risk associated with going back. Belief distortions are larger among those facing potential health complications conditional on infection. Our results are informative about when and for whom interventions will be most effective.