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

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  • Lars Lefgren

    (Department of Economics, Brigham Young University, Provo, Utah 84602)

  • Brennan Platt

    (Department of Economics, Brigham Young University, Provo, Utah 84602)

  • Joseph Price

    (Department of Economics, Brigham Young University, Provo, Utah 84602)

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.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1966 . This paper was accepted by Yuval Rottenstreich, judgment and decision making.

Suggested Citation

  • Lars Lefgren & Brennan Platt & Joseph Price, 2015. "Sticking with What (Barely) Worked: A Test of Outcome Bias," Management Science, INFORMS, vol. 61(5), pages 1121-1136, May.
    • Handle: RePEc:inm:ormnsc:v:61:y:2015:i:5:p:1121-1136
    DOI: 10.1287/mnsc.2014.1966
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    3. Kausel, Edgar E. & Ventura, Santiago & Rodríguez, Arturo, 2019. "Outcome bias in subjective ratings of performance: Evidence from the (football) field," Journal of Economic Psychology, Elsevier, vol. 75(PB).
    4. Sandro Casal & Matteo Ploner & Alec N. Sproten, 2019. "Fostering The Best Execution Regime: An Experiment About Pecuniary Sanctions And Accountability In Fiduciary Money Management," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 600-616, January.
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    6. Enzo Brox & Michael Lechner, 2024. "Teamwork and Spillover Effects in Performance Evaluations," Papers 2403.15200, arXiv.org.
    7. Pascal Flurin Meier & Raphael Flepp & Egon Franck, 2022. "Are Expectations Misled by Chance? Quasi-Experimental Evidence from Financial Analysts," Working Papers 396, University of Zurich, Department of Business Administration (IBW).
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    9. Christian König-Kersting & Monique Pollmann & Jan Potters & Stefan T. Trautmann, 2021. "Good decision vs. good results: Outcome bias in the evaluation of financial agents," Theory and Decision, Springer, vol. 90(1), pages 31-61, February.
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    13. Meier, Pascal Flurin & Flepp, Raphael & Meier, Philippe & Franck, Egon, 2022. "Outcome bias in self-evaluations: Quasi-experimental field evidence from Swiss driving license exams," Journal of Economic Behavior & Organization, Elsevier, vol. 201(C), pages 292-309.
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    17. Eric J. Allen & Patricia M. Dechow & Devin G. Pope & George Wu, 2017. "Reference-Dependent Preferences: Evidence from Marathon Runners," Management Science, INFORMS, vol. 63(6), pages 1657-1672, June.

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