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

Author

Listed:
  • 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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