Fooled by randomness: over-rewarding luck

Romain Gauriot and Lionel Page

No 2018-03, Working Papers from University of Sydney, School of Economics

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)
Date: 2018-07
New Economics Papers: this item is included in nep-spo
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Citations: View citations in EconPapers (6)

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