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'I'll do it by myself as I knew it all along': On the failure of hindsight-biased principals to delegate optimally

  • Danz, David
  • Hüber, Frank
  • Kübler, Dorothea
  • Mechtenberg, Lydia
  • Schmid, Julia

With the help of a simple model, we show that the hindsight bias can lead to inefficient delegation decisions. This prediction is tested experimentally. In an online experiment that was conducted during the FIFA World Cup 2010 participants were asked to predict a number of outcomes of the ongoing World Cup and had to recall their assessments after the outcomes had been realized. This served as a measure of the hindsight bias for each participant. The participants also had to make choices in a delegation game. Our data confirm that hindsight-biased subjects more frequently fail to delegate optimally than subjects whom we have classified as not hindsight biased.

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Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Market Behavior with number SP II 2013-203.

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Date of creation: 2013
Date of revision:
Handle: RePEc:zbw:wzbmbh:spii2013203
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  1. Roland Strausz, 2006. "Interim Information in Long-Term Contracts," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 1041-1067, December.
  2. Chan, Yuk-Shee & Siegel, Daniel R & Thakor, Anjan V, 1990. "Learning, Corporate Control and Performance Requirements in Venture Capital Contracts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 365-81, May.
  3. Bj�rn Bartling & Urs Fischbacher, 2008. "Shifting the Blame: On Delegation and Responsibility," TWI Research Paper Series 32, Thurgauer Wirtschaftsinstitut, Universit�t Konstanz.
  4. Ernst Fehr & Holger Herz & Tom Wilkening, 2012. "The lure of authority: Motivation and incentive effects of power," UBSCENTER - Working Papers 002, UBS International Center of Economics in Society - Department of Economics - University of Zurich.
  5. David Owens Jr. & Zachary Grossman Jr. & Ryan Fackler Jr., 2014. "The Control Premium: A Preference for Payoff Autonomy," American Economic Journal: Microeconomics, American Economic Association, vol. 6(4), pages 138-61, November.
  6. Madarasz, Kristof, 2008. "Information projection: model and applications," MPRA Paper 38612, University Library of Munich, Germany, revised 2011.
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