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

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.