Essays on psychology and economics

We model a social conflict in a population inhabited by individuals from two exogenous and well defined social groups. We show that the struggle for resources drives the conflict through the rational destruction of surplus. Every agent is a member of one social group where this status is observable. Our population contains both rational players and behavioral players. Behavioral players aggressively discriminate against members of the other social group. Our specification of the behavioral player is motivated by the psychology literature on social identity. For rational players, group membership has no payoff relevant consequences. We show that rational players can contribute to the conflict by aggressively discriminating and that this behavior is consistent with existing empirical evidence.; In the second essay, we propose a theory of cognitive dissonance through imperfect memory. Cognitive dissonance is the tendency of a person to engage in self justification after a decision. We offer an interpretation of the single decision cognitive dissonance experiments: an agent has an unknown cost of effort and before the decision receives a private signal of the cost of effort, which is subsequently forgotten. Following the decision, the agent makes an inference regarding the content of this signal based on the publicly available information: the action taken and the wage paid. We explore the implications of this interpretation in a setting requiring a decision of effort in two periods. A preference for increasing payments naturally emerges from our model.; In the third essay, we propose that cognitive dissonance contributes to the explanation of the observed regularity that wages tend to grow faster than productivity. Cognitive dissonance is the tendency of a person to engage in self-justification after a decision. In a repeated decision setting, this tendency implies that preferences in subsequent periods are affected by outcomes in previous periods. A consequence being that agents prefer increasing sequences of surplus over their career. This payment profile is achieved by paying an agent less than productivity early in the career and more than productivity later: wages overtake productivity. We refer to this condition as the overtaking anomaly.