Outcome Bias in Decision Making on Punishment or Reward

We document outcome bias in situations where an agent makes risky financial decisions for a principal. In three experiments, we show that the principal’s evaluations and financial rewards for the agent are strongly affected by the random outcome of the risky investment. This happens despite her exact knowledge of the investment strategy, which can, therefore, be assessed independently of the outcome. The principal thus judges the same decision by the agent differently, depending on factors that the agent has no influence on. The effect of outcomes persists in a setting where principals communicate a preferred investment level. Principals are more satisfied with the agent after a random success when the agent did not follow the requested investment level, than after a failed investment that followed their explicit request.

show abstract

“…These findings are supported and augmented by further studies, e.g. by Murata et al (2015) and Sezer et al (2016).…”

Section: Introductionsupporting

confidence: 73%

Good decision vs. good results: Outcome bias in the evaluation of financial agents

et al. 2020

View full text Add to dashboard Cite

show abstract

Inferences about moral character moderate the impact of consequences on blame and praise

2017

View full text Add to dashboard Cite

show abstract

Do Lucky People Reciprocate More? The Effect of Outcome Bias on Trustworthiness

Muchtar

2024

Studies in Microeconomics

View full text Add to dashboard Cite

This study investigates how reciprocity works in a simple trust game when the subjects are framed as either lucky or unlucky. We induce luckiness perception to the second mover by introducing uncertainty with a different combination of possible multipliers, allowing us to observe the effect of outcome bias on trustworthiness while controlling for the wealth effect. We do not find a significantly different level of trustworthiness between lucky second movers and unlucky second movers. The result suggests the null effect of outcome bias on reciprocal behaviour. JEL Classifications: C91, D01, D63, D91

show abstract

Outcome Bias in Decision Making on Punishment or Reward

Cited by 3 publications

References 10 publications

Good decision vs. good results: Outcome bias in the evaluation of financial agents

Good decision vs. good results: Outcome bias in the evaluation of financial agents

Inferences about moral character moderate the impact of consequences on blame and praise

Do Lucky People Reciprocate More? The Effect of Outcome Bias on Trustworthiness

Contact Info

Product

Resources

About