Sticking with What (Barely) Worked: A Test of Outcome Bias

Lars Lefgren (), Brennan Platt and Joseph Price

Management Science, 2015, vol. 61, issue 5, 1121-1136

Abstract: Outcome bias occurs when an evaluator considers ex post outcomes when judging whether a choice was correct ex ante. We formalize this cognitive bias in a simple model of distorted Bayesian updating. We then examine strategy changes made by professional basketball coaches. We find that they are more likely to revise their strategy after a loss than a win---even for narrow losses, which are uninformative about team effectiveness. This increased strategy revision following a loss occurs even when a loss was expected and even when failure is due to factors beyond the team's control. These results are consistent with our model's predictions.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1966 . This paper was accepted by Yuval Rottenstreich, judgment and decision making.

Keywords: outcome bias; hindsight bias; Bayesian updating; strategy revision (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (19)

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