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Fooled by performance randomness: over-rewarding luck

Romain Gauriot and Lionel Page ()

No 49, QuBE Working Papers from QUT Business School

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 which landed on the goal posts. Using non scoring 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.

Keywords: contract theory; informativeness principle; quasi-experiment; outcome bias; behavioural economics. (search for similar items in EconPapers)
JEL-codes: D23 D83 D86 L14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-spo
Date: 2017-03-17
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