Sticking with What (Barely) Worked

43 Pages Posted: 15 Mar 2014

See all articles by Lars Lefgren

Lars Lefgren

Brigham Young University

Brennan C Platt

Brigham Young University - Department of Economics

Joseph Price

Brigham Young University

Multiple version iconThere are 2 versions of this paper

Date Written: December 13, 2013

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 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.

Keywords: outcome bias, hindsight bias, Bayesian updating, strategy revision

JEL Classification: C11, D03, D81, L83

Suggested Citation

Lefgren, Lars and Platt, Brennan C and Price, Joseph, Sticking with What (Barely) Worked (December 13, 2013). Available at SSRN: https://ssrn.com/abstract=2409128 or http://dx.doi.org/10.2139/ssrn.2409128

Lars Lefgren

Brigham Young University ( email )

130 Faculty Office Bldg.
Provo, UT 84602-2363
United States

Brennan C Platt

Brigham Young University - Department of Economics ( email )

130 Faculty Office Bldg.
Provo, UT 84602-2363
United States
801-422-8904 (Phone)

HOME PAGE: http://econ.byu.edu

Joseph Price (Contact Author)

Brigham Young University ( email )

130 FOB
Provo, UT 84604
United States

HOME PAGE: http://https://economics.byu.edu/directory/joseph-p-price

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