Fooled by Performance Randomness: Overrewarding Luck

Romain Gauriot and Lionel Page

The Review of Economics and Statistics, 2019, vol. 101, issue 4, 658-666

Abstract: We provide evidence of a violation of the informativeness principle whereby lucky successes are overly rewarded. We isolate a quasi-experimental situation where the success of an agent is as good as random. To do so, we use high-quality data on football (soccer) matches and select shots on goal that landed on the goal posts. Using nonscoring shots, taken from a similar location on the pitch, as counterfactuals to scoring shots, we estimate the causal effect of a lucky success (goal) on the evaluation of the player's performance. We find clear evidence that luck is overly influencing managers' decisions and evaluators' ratings. Our results suggest that this phenomenon is likely to be widespread in economic organizations.

Date: 2019
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