Outcome Bias – Definition

Cite this article as:"Outcome Bias – Definition," in The Business Professor, updated December 2, 2019, last accessed August 14, 2020, https://thebusinessprofessor.com/lesson/outcome-bias-definition/.

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Outcome Bias Definition

Outcome bias is a form of prejudice against a particular decision or event based on the results of previous decisions or events. Outcome bias is a common practice in the sense that people tend to judge the outcome of an event using the outcome of other related events regardless of different effects put in the formation of the events.

Outcome bias is a cognitive prejudice or inclination in which people focus on the outcomes of previous actions in judging the outcome of another without adequating evaluating the factors responsible for such outcomes and the quality that makes the present action different from past ones.

A Little More on What is Outcome Bias

In an outcome bias, the outcomes of previous or related events are overemphasized while the activities, quality of thoughts and processes that go into the actions are disregarded. The outcomes of such actions are used in predicting the outcome of the present, outcome bias is often regarded as an error because it pays no attention to analysis and evaluation.

Outcome bias is a cognitive pattern that follows a routine of judging the outcome of an event based on the outcomes of other events. When compared to hindsight bias, outcome bias is more fatal. For instance, if an investor enters an investment solely because another investor made huge returns from the investment in the past, it is a form of outcome bias. The evaluation, thoughts, processes, and techniques put into the investment are not considered.

Outcome bias can occur in several fields and industries, even in the business realm. Then this error or bias occurs ina business, it may mean that the management f a company is overly fixated on the profits of the company and expect the profit margin to follow similar patterns of profits in the past without any regard for the efforts, marketing strategies and production techniques that contributed to them.

Outcome bias can also occur in gambling, it is a situation whereby a gambler decides to gamble because of the wins recorded by an acquaintance without giving regard to the techniques and expertise used to make the wins.

References for “Outcome Bias


https://www.investopedia.com › Investing › Financial Analysis



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