Title

Sticking with What (Barely) Worked :A Test of Outcome Bias

Keywords

outcome bias, hindsight bias, Bayesian updating, strategy revision

Abstract

Outcome bias occurs when an evaluator considers ex post outcomes when judging whether a choice was correct ex ante. We formalize this cognitive bias in a simple model of distorted Bayesian updating. We then examine strategy changes made by professional basketball coaches. We find that they are more likely to revise their strategy after a loss than a win—even for narrow losses, which are uninformative about team effectiveness. This increased strategy revision following a loss occurs even when a loss was expected and even when failure is due to factors beyond the team’s control. These results are consistent with our model’s predictions.

Original Publication Citation

“Sticking with What (Barely) Worked,” by Lars Lefgren, Brennan Platt, and Joseph Price. Management Science, 61:1121-1136, March 2015.

Document Type

Peer-Reviewed Article

Publication Date

2015-3

Publisher

Management Science

Language

English

College

Family, Home, and Social Sciences

Department

Economics

University Standing at Time of Publication

Full Professor

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