Skill or Luck? Biases of Rational Agents

39 Pages Posted: 24 Jul 2002

See all articles by Eric Van den Steen

Eric Van den Steen

Harvard Business School - Strategy Unit

Date Written: June 2002

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.

Keywords: Rational Agents, Heterogeneous Priors, Attribution and Inference Bias, Behavioral Bias, Overconfidence, Self-serving Bias

Suggested Citation

van den Steen, Eric, Skill or Luck? Biases of Rational Agents (June 2002). MIT Sloan Working Paper No. 4255-02. Available at SSRN: https://ssrn.com/abstract=319972 or http://dx.doi.org/10.2139/ssrn.319972

Eric Van den Steen (Contact Author)

Harvard Business School - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States

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