Friday, February 3, 2012

Outcome Bias

Outcome bias is the tendency to judge a decision by its outcome instead of based on the quality of the decision at the time it was made.  This is an unfair method of judgement since the person evaluating the decision knows what the outcome of the decision was while the decision maker did not have this information at the time the decision was made.

Probably the most famous paper on the subject was written by Baron and Hershey in the Journal of Personality and Social Psychology (1988) titled Outcome Bias in Decision Evaluation.(1)  They hypothesized that outcome  bias may exist because the "generally useful heuristic of evaluating decisions according to their outcomes might be overgeneralized to situations where it is inappropriate. It might be learned as a rigid rule, perhaps from seeing punishment meted out for bad outcomes resulting from reasonable decisions."

To test their theory, they devised a set of 5 experiments. For example, one of the experiments involved a questionnaire of 15 medical decisions the subjects were asked to evaluate.  For instance, one of the questions was:
"A 55 year old man had a heart condition. He had to stop working because of chest pain. He enjoyed his work and did not want to stop. His pain also interfered with other things, such as travel and recreation.
A type of bypass operation would relieve his pain and increase his life expectancy from age 65 to age 70. However, 8% of the people who have this operation die from the operation itself.2 His physician decided to go ahead with the operation. The operation succeeded.
Evaluate the physician's decision to go ahead with the operation."
Another question in the questionnaire asked essentially the same question with the same probabilities but with the operation resulting in the death of the patient.

The results were that they found consistent outcome bias in all five experiments.