Maintaining Beliefs in the Face of Negative News: The Moderating Role of Experience

Bradley R. Staats (), Diwas S. Kc () and Francesca Gino ()
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Bradley R. Staats: Kenan-Flagler Business School, University of North Carolina at Chapel Hill, Chapel Hill, North Carolina 27599
Diwas S. Kc: Goizueta Business School, Emory University, Atlanta, Georgia 30322
Francesca Gino: Harvard Business School, Harvard University, Boston, Massachusetts 02163

Management Science, 2018, vol. 64, issue 2, 804-824

Abstract: Many models in operations management involve dynamic decision making that assumes optimal updating in response to information revelation. However, behavioral theory suggests that rather than updating their beliefs, individuals may persevere in their prior beliefs. In particular, we examine how individuals’ prior experiences and the experiences of those around them alter their belief perseverance in operational decisions after the revelation of negative news. We draw on an exogenous announcement of negative news by the Food and Drug Administration and explore how it affects interventional cardiologists deciding between two types of cardiac stents. Analyzing 147,000 choices over six years, we find that individuals do respond to negative news by using the focal production tool less often. However, we find that both individuals’ own experiences and others’ experiences alter their responses. Moreover, although individual and other experience act as substitutes before negative news, we find that this substitution significantly curtails following the negative announcement. Finally, we find that experience leads doctors to discount negative news more rapidly over time. Two lab studies replicate our main findings and show that behavioral biases due to differences in perceptions of expertise drive the effect. Our research contributes not only to operations research but also to the practice of healthcare and operations.

Keywords: behavioral operations; egocentric bias; empirical operations; experience; healthcare operations (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (13)

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