Understanding outcome bias
Andy Brownback and Michael Kuhn argue that separating effort from luck is essential in judging outcomes. In a principal-agent experiment, principals judged agents on outcomes influenced by luck even though effort was perfectly observable, which weakens the incentive to work hard. The authors test two fixes, letting principals or agents control information about luck and handing the judgement to independent third parties. Neither worked: principals did not avoid luck-driven information when they could, agents used it to reduce punishment, and third parties also showed outcome bias. Elicited beliefs showed that lucky agents were seen as harder workers than identical unlucky ones, which the authors take to mean that luck shapes inferences about an agent even when effort is observed.
Andy Brownback and Michael Kuhn argue that separating effort from luck is essential in judging outcomes. In a principal-agent experiment, principals judged agents on outcomes influenced by luck even though effort was perfectly observable, which weakens the incentive to work hard. The authors test two fixes, letting principals or agents control information about luck and handing the judgement to independent third parties. Neither worked: principals did not avoid luck-driven information when they could, agents used it to reduce punishment, and third parties also showed outcome bias. Elicited beliefs showed that lucky agents were seen as harder workers than identical unlucky ones, which the authors take to mean that luck shapes inferences about an agent even when effort is observed.
Written from the abstract read 2026-10-22 via IDEAS, with design details from the January 2019 working paper.
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117, 342-360. doi:10.1016/j.geb.2019.07.003. Read at the level of the published abstract.