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Skill or Luck? Biases of Rational Agents

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Author Info
Eric, Van den Steen

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Abstract

This paper shows why, in a world with differing priors, rational agents tend to attribute their own success more to skill and their failure more to bad luck than an outsider. It further shows why each agent in a group might think he or she is the best, why an agent might overestimate the control he has over the outcome, and why two agents' estimated contributions often add up to more than 100%. Underlying all these phenomena is a simple and robust mechanism that endogenously generates overoptimism about one's own actions. The paper also shows how these biases hinder learning and discusses some implications for organizations.

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File URL: http://hdl.handle.net/1721.1/1569
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Publisher Info
Paper provided by Massachusetts Institute of Technology (MIT), Sloan School of Management in its series Working papers with number 4255-02.

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Date of creation: 09 Aug 2002
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Handle: RePEc:mit:sloanp:1569

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Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), SLOAN SCHOOL OF MANAGEMENT, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA

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Related research
Keywords: Success; Failure; Attribution and Inference Bias; Rational Agents;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Edward P. Lazear, 2001. "The Peter Principle: Promotions and Declining Productivity," NBER Working Papers 8094, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Harsanyi, John C, 1995. "Games with Incomplete Information," American Economic Review, American Economic Association, vol. 85(3), pages 291-303, June.
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  3. Glenn Ellison, 2000. "Evolving Standards for Academic Publishing: A q-r Theory," NBER Working Papers 7805, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Wilson, Robert, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Blackwell Publishing, vol. 44(3), pages 511-18, October. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Olivier Compte & Andrew Postlewaite, 2001. "Confidence-Enhanced Performance," PIER Working Paper Archive 04-023, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 May 2003. [Downloadable!]
    Other versions:
  2. Alexander Meschkowski, . "The Economics Of D&O Liability For False Information In German Secondary Capital Markets," German Working Papers in Law and Economics 2006-1-1135, Berkeley Electronic Press. [Downloadable!]
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This page was last updated on 2009-12-8.

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