Abstract

This paper considers the implications of an important cognitive bias in information processing, confirmation bias, in a political agency setting. When voters have this bias and when only the politician’s actions are observable before the election, it decreases pandering by the incumbent, and can raise voter welfare as a consequence. This result is driven by the fact that the noise aspect of confirmation bias, which decreases pandering, dominates the bounded rationality aspect, which increases it. The results generalize in several directions, including to the case where the voter can also observe payoffs with some probability before the election. We identify conditions when confirmation bias strengthens the case for decision-making by an elected rather than an appointed official.