The Role of Effort Cost Perception in Outcome Bias

28 Pages Posted: 3 Mar 2021 Last revised: 5 Oct 2021

See all articles by Robizon Khubulashvili

Robizon Khubulashvili

University of San Francisco

Sera Linardi

University of Pittsburgh

Xiaohong Wang

University of Pittsburgh

Date Written: October 04, 2021

Abstract

Outcome bias is pervasive and persistent across different environments. In our noisy gift-exchange game, where agents can perform a real effort task to improve principals' lottery win probability, we replicate outcome bias in effort rewarding when effort is only numerically observable. To investigate the role of principals' beliefs on effort cost, we employed a visual treatment in which principals watch a 30-second video of the agents performing the task. We show that visually observing agents' work corrects asymmetry in rewarding effort. The post-experiment survey suggests that the mechanism through which visually observing effort reduces the outcome bias in reciprocating effort is informing principals about the cost of effort.

Keywords: outcome bias, reciprocity, real effort, visual, non-payoff relevant dimension, effort cost perception

JEL Classification: C92, D63, D64, D83

Suggested Citation

Khubulashvili, Robizon and Linardi, Sera and Wang, Xiaohong, The Role of Effort Cost Perception in Outcome Bias (October 04, 2021). Available at SSRN: https://ssrn.com/abstract=3789963 or http://dx.doi.org/10.2139/ssrn.3789963

Robizon Khubulashvili (Contact Author)

University of San Francisco ( email )

2130 Fulton Street
San Francisco, CA 94117
United States

HOME PAGE: http://https://www.robizonk.com/

Sera Linardi

University of Pittsburgh ( email )

135 N Bellefield Ave
Pittsburgh, PA 15260
United States

Xiaohong Wang

University of Pittsburgh ( email )

135 N Bellefield Ave
Pittsburgh, PA 15260
United States

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