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Play it again! A Natural Experiment on Reversibility Bias

Thomas Bassetti (), Stefano Bonini (), Fausto Pacicco () and Filippo Pavesi
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Stefano Bonini: Stevens Institute of Technology
Fausto Pacicco: LIUC Università Carlo Cattaneo

No 238, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: Behavioral biases affect a large number of human decisions, many of which have relevant welfare effects. We identify a bias that we denote as "reversibility bias" and explore how the introduction of explicit exposure mechanisms can contribute to attenuate it. To do this, we exploit a unique natural experiment - the introduction of a decision review system represented by player challenges and the associated Hawk-Eye technology in professional tennis. This experiment allows us to identify the bias, by illustrating that if such a bias exists, the challenge rule should reduce the number of calls that postpone the assignment of a point. Our findings may have significant policy implications providing a conceptual framework for the design of institutions to alleviate the welfare costs associated with reversibility bias in different contexts, such as court rulings, human resource management and debt roll-over decisions.

Keywords: prospect theory; natural experiment; uncertainty (search for similar items in EconPapers)
JEL-codes: C93 D81 D91 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2019-08
New Economics Papers: this item is included in nep-upt
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