(Note: this is reading material for your understanding and also for exam, Assignments point of

view, besides for detailed understanding you must have to read the chapters from book of
behavioral finance mentioned with topics also)

COGNITIVE DISSONANCE (chapter 7)

Cognitive dissonance refers to a situation involving conflicting attitudes, beliefs or behaviors.

For example, when people smoke (behavior) and they know that smoking causes cancer
(cognition), they are in a state of cognitive dissonance.
The state of having inconsistent thoughts, beliefs, or attitudes, especially as relating to behavioral
decisions and attitude changes.
Cognitive Dissonance: How does it Influence How We Think?
What is Cognitive Dissonance?
Cognitive dissonance is the psychological concept of the feeling of tension that happens when
someone holds two conflicting beliefs, ideas, or values at the same time. It occurs both when
someone performs an action that contradicts personal beliefs and also when someone is
confronted with new information that contradicts their already existing beliefs and values. When
there is an inconsistency between your belief and your behavior, this inconsistency itself is
known as dissonance, whereas the concept of conflicting beliefs and actions is known as
cognitive dissonance. Something must change in order to eliminate this dissonance because
cognitive dissonance involves internal conflict. 
Is cognitive dissonance a mental disorder? Cognitive dissonance is not a mental disorder. It is
simply the happening of conflicting beliefs in your mind, which happens to everybody. 
Starting in the late 1950s, people started to look at cognitive dissonance, particularly Leon
Festinger and his students at Stanford, who wrote the book A Theory of Cognitive Dissonance.
According to Festinger, the important factor in cognitive dissonance theory is the principle of
cognitive consistency. This principle states that we, as humans, seek consistency in our beliefs
and attitudes in any situation where two cognitions are inconsistent. This inconsistency causes
psychological distress and discomfort internally, and so the motivation to reduce the discomfort
comes about. If it persists it can lead to depression, anxiety symptoms and/or severe stress.
What causes cognitive dissonance?
CAUSES OF COGNITIVE DISSONANCE
 Forced Compliance Behavior. ...
 Decision Making. ...
 Effort. ...
 Gaining New Information. ...
 Change The Dissonant Beliefs. ...
 Change The Conflicting Action Or Behavior. ...
 Reduce The Significance Of The Conflicting Belief.
What does cognitive dissonance feel like?
Everybody will feel cognitive dissonance to their own degree, especially depending on the action
and the belief at hand. If you believe you are a good person, but you do something bad, the
discomfort you feel from doing something bad is known as cognitive dissonance. Most people
are acutely aware that they are experiencing a dissonance of some sort when it occurs.
How do you know if you have cognitive dissonance?
Some common signs of cognitive dissonance include:
 1. Feeling uncomfortable.
2. (Conflict) avoidance.
3. Rationalization.
4. Shame.
5. Guilt.
6. Ignoring the facts.
Is cognitive dissonance bad?
Although people may think cognitive dissonance is a bad thing, it actually helps to keep us
mentally healthy and happy. It may make us feel satisfied with our choices—or at least lets us
justify them—especially when they cannot be easily reversed.
What is emotional dissonance?
In the workplace, emotional dissonance is the conflict between experienced emotions and
emotions expressed to conform to display rules.
Emotional dissonance aroused feelings of job dissatisfaction and reduced organizational
commitment among high self-monitors.
How does cognitive dissonance affect behavior?
It’s been proven that humans are repetitive creatures: we are likely to repeat the same behaviors.
Why? Because often a person’s behavior is the result of factors between motivational and
personality that are common in the situations in which the behavior occurs. Some people might
think about the consequences of a repeated behavior and their post-behavior cognitions would
guide their future actions. Other people might use past behavior on a trial-and-error basis for
future actions and decisions.
If an action has been completed and can’t be undone, our after-the-fact thinking compels us to
change our beliefs. When our beliefs change, dissonance appears forcing us to take actions that
we would not have before.
What are the effects of cognitive dissonance?
Cognitive dissonance has the immediate effect of causing feelings of discomfort and unease. As
people generally have an innate desire to avoid this discomfort, cognitive dissonance has a
significant effect on a person's: behaviors’ Thoughts.
How to Reduce Cognitive Dissonance
This dissonance can be reduced in a number of ways including:
 Changing one or more of the attitudes, behaviors, or beliefs to make the relationship
between thoughts and actions compatible.
o Likely the hardest solution, but the most effective. For example, you quit drinking
coffee while pregnant because you believe that caffeine is bad for a growing fetus.
To actually quit is much harder than to make an excuse to be able to keep
drinking coffee.
 Acquire new information that outweighs the dissonant beliefs
o People who learn that eating lots of red meat is unhealthy might seek out
information that disputes that claim. This new information might say that red
meat is healthy because of the protein inside and thus, reduce the discomfort and
dissonance experienced.
 Reduce the importance of the beliefs, behaviors, or attitudes.
o Someone who hears that sitting all day is bad for your health, but they spend all
day in the office sitting down, it’s difficult to change the belief that sitting is
harmful to your health. Instead, they might just say that they drink enough water
 or eat salads for lunch, healthy behaviors, to make up for sitting all day, an
unhealthy behavior
Methodologies used to reduce Cognitive dissonance •
Forced Compliance: When someone is forced to do (publicly) something they (privately)
really don't want to do, dissonance is created between their cognition (I didn't want to do this)
and their behavior (I did it).
• Effort Justification: To achieve some desired goal and this dissonance can be reduced by
exaggerating the desirability of the goal
• Decision making: When you have a choice between equally attractive alternatives and
after making a decision the attitude changes a you have to accept the decision
CONCLUSION
Cognitive Dissonance have many useful applications in the field of education, in motivating
students to engage in educational activities
• The theory also predicts that individuals reward for the performance of a task
• Knowledge of these dynamics would be beneficial not only in the fields of motivation,
persuasive psychology, and psychotherapy, but perhaps, more importantly, in many real life
situations as well like Consume behaviour, Promoting healthy and pro-social behaviour etc