A model of moral balancing under motivated reasoning

While there is abundant empirical evidence of individuals switching between selfish and prosocial behavior, few economic models formalize these findings. This paper presents a novel model that jointly analyzes three key concepts for understanding prosocial behavior: moral balancing, self-signaling, and motivated reasoning. Individuals maximize material utility under the constraint of maintaining a minimum level of self-image (moral balancing), where self-image depends on signals extracted from past behavior (self-signaling). The processing of these signals is biased toward arriving at a positive self-image (motivated reasoning). The time horizon for which the self-image constraint is active depends on individuals’ intrinsic motivation and their awareness of self-image relevant choices. Selfish behavior tends to be higher when the constraint is only active in the long term and it increases with the tendency toward motivated reasoning. These results are partially consistent with experimental results. The model suggests that voluntary prosocial behavior is unlikely to be sustained and thus calls for adequate policy measures.