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| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | The Outcome Bias in Advised and Autonomous Decisions |
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| Institution | University of Zurich |
| Faculty | Faculty of Economics, Business Administration and Information Technology |
| Number of Pages | 65 |
| Date | 2016 |
| Abstract Text | Evaluations of decisions are essential as they influence how we decide in subsequent events. When evaluating decisions under risk, people tend to overweight the outcomes of the decisions. This phe-nomenon is called outcome bias and was first discovered by Baron and Hershey (1988). In several experiments they showed that individuals were more likely to rate the quality of thinking of medical decision makers and gamblers lower when the outcome was poor and higher when the outcome was good, even though the ex-ante objective probabilities for a good or bad outcome were the same and outcome information had no additional insight. The main cause of the outcome bias is an overgeneral-ization of the heuristic that “good decisions lead to good outcomes and bad decisions lead to bad out-comes”. The outcome bias has been shown to exist in several fields and debiasing or attenuating it has proven quite difficult. Prior literature shows that the outcome bias does not only exist when individuals evaluate the deci-sions of others, but also when they evaluate their own decisions. Furthermore, it has been shown to have an influence on how individuals decide in future investment decisions. Most investment deci-sions are not made alone, but after consulting with a financial advisor, and such financial advice has been proven efficient in reducing several biases. The outcome bias, however, has never been examined in an advised situation pursuant to an extensive literature review. This master’s thesis explores the impact of the outcome bias in an advised compared to an autonomous investment decision setting with the help of an experiment. The main research question sets out to answer whether the outcome bias in the evaluation of one’s own reasoning and of the intention to make the same decision in future will differ between a group which makes autonomous decisions and a group which makes advised decisions. Furthermore, the advised group will be asked to evaluate the quality of the investment advice received to see whether the outcome bias differs between evaluating the quality of the advice received, evaluating the quality of one’s own reasoning and evaluating the intention to make the same decision in future. Thereby, the main goal consists of analyzing the impact that receiving advice has on the outcome bias. |
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