How can naiveté about present bias persist despite experience? To answer this question, our experiment investigates participants' ability to learn from their own behavior. Participants decide how much to work on a real effort task on two predetermined dates. In the week preceding each work date, they state their commitment preferences and predictions of future effort. While we find that participants are present biased and initially naive about their bias, our methodology enables us to establish that they are Bayesian in how they learn from their experience at the first work date. A treatment in which we vary the nature of the task at the second date further shows that learning is unencumbered by a change in environment. Our results suggest that persistent naiveté cannot be explained by a fundamental inferential bias. At the same time, we find that participants initially underestimate the information that their experience will provide -- a bias that may lead to underinvestment in experimentation and a failure to activate self-regulation mechanisms.

Laboratory evidence shows that when people have to argue for a given position, they persuade themselves about the position's factual and moral superiority. Such self-persuasion limits the potential of communication to resolve conflict and reduce polarization. We test for this phenomenon in a field setting, at international debating competitions that randomly assign experienced and motivated debaters to argue one side of a topical motion. We find self-persuasion in factual beliefs and confidence in one's position. Effect sizes are smaller than in the laboratory, but robust to a one-hour exchange of arguments and a ten-fold increase in incentives for accuracy.

Evidence from studies in international relations, the politics of reform, collective action and price competition suggests that economic agents in social dilemma situations cooperate more to avoid losses than in the pursuit of gains. To test whether the prospect of losses can induce cooperation, we let experimental subjects play the traveler's dilemma in the gain and loss domain. Subjects cooperate substantially more over losses. Our experimental design allows us to show that this treatment effect is best explained by reference-dependent risk preferences and reference-dependent strategic sophistication. We discuss policy implications and relate our findings to other experimental games played in the loss domain.

Unfavorable news are often delivered under the disguise of vagueness. But are people sufficiently naive to be fooled by such positive spin? We use a theoretical model and a laboratory experiment to study the strategic use of vagueness in a voluntary disclosure game. Consider a sender who aims at inflating a receiver's estimate of her type and who may disclose any interval that contains her actual type. Theory predicts that when facing a possibly naive receiver, the sender discloses an interval that separates her from worse types but is upwardly vague. Senders in the experiment adopt this strategy and some (naive) receivers are systematically misled by it. Imposing precise disclosure leads to less, but more easily interpretable, disclosure. Both theory and experimental data further suggest that imposing precision improves overall information transmission and is especially beneficial to naive receivers. Our results have implications for the rules that govern the disclosure of quality-relevant information by firms, the disclosure of research findings by scientists, and testimonies in a court of law.

We test two hypotheses, based on sexual selection theory, about gender differences in costly social interactions. Differential selectivity states that women invest less than men in interactions with new individuals. Differential opportunism states that women's investment in social interactions is less responsive to information about the interaction's payoffs. The hypotheses imply that women's social networks are more stable and path dependent and composed of a greater proportion of strong relative to weak links. During their introductory week, we let new university students play an experimental trust game, first with one anonymous partner, then with the same and a new partner. Consistent with our hypotheses, we find that women invest less than men in new partners and that their investments are only half as responsive to information about the likely returns to the investment. Moreover, subsequent formation of students' real social networks is consistent with the experimental results: being randomly assigned to the same introductory group has a much larger positive effect on women's likelihood of reporting a subsequent friendship.

We propose a simple model of borrower optimism in competitive lending markets with asymmetric information. Borrowers in our model engage in self-deception to arrive at a belief that optimally trades off the anticipatory utility benefits and material costs of optimism. Lenders' contract design shapes these benefits and costs. The model yields three key results. First, the borrower's motivated cognition increases her material welfare, regardless of whether or not she ends up being optimistic in equilibrium. Our model thus helps explain why wishful thinking is not driven out of markets. Second, in line with empirical evidence, a low cost of lending and a booming economy lead to optimism and the widespread collateralization of loans. Third, equilibrium collateral requirements may be inefficiently high.

It is widely hypothesized that anxiety and worry about an uncertain future lead to the adoption of comforting beliefs or "wishful thinking". However, there is little direct causal evidence for this effect. In our experiment, participants perform a visual pattern recog- nition task where some patterns may result in the delivery of an electric shock, a proven way of inducing anxiety. Participants engage in significant wishful thinking, as they are less likely to correctly identify patterns that they know may lead to a shock. Greater ambiguity of the pattern facilitates wishful thinking. Raising incentives for accuracy does not significantly decrease it.

Unfavorable news are often delivered under the disguise of vagueness. Our theory-driven laboratory experiment investigates this strategic use of vagueness in voluntary disclosure and asks whether there is scope for policy to improve information transmission. We find that vagueness is profitably deployed by senders to fool those receivers that lack strategic sophistication. Imposing precise disclosure leads to more easily interpretable messages, but results in fewer sender types disclosing at all. Since non- disclosure also systematically misleads naive receivers, the welfare implications of imposing precision are not obvious. However, our model and experiment show that information transmission and the welfare of naive receivers are improved by policies that impose precision. Our results speak to the rules governing firms' disclosure of quality-relevant information, the disclosure of research findings, and testimonies in a court of law.

People deny health risks, invest too little in disease prevention, and are highly sensitive to the price of preventative health care, especially in developing countries. Moreover, private sector R&D spending on developing-country diseases is almost non-existent. To explain these empirical observations, I propose a model of motivated belief formation, in which an agent's decision to engage in health risk denial balances the psychological benefits of reduced anxiety with the physical cost of underprevention. I use the model to study firms' price-setting behaviour and incentive to innovate. I also show that tax-funded prevention subsidies are welfare enhancing.