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  • 2015
  • Working Paper
  • HBS Working Paper Series

Blinded by Experience: Prior Experience, Negative News and Belief Updating

By: Bradley R. Staats, Diwas S. KC and Francesca Gino
  • Format:Print
  • | Language:English
  • | Pages:37
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Abstract

Traditional models of operations management involve dynamic decision-making assuming optimal (Bayesian) updating. However, behavioral theory suggests that individuals exhibit bias in their beliefs and decisions. We conduct both a field study and two laboratory studies to examine the phenomena in the context of health. In particular, we examine how an individual's prior experiences and the experiences of those around them alter the operational decisions that the individual makes. We draw on an exogenous announcement of negative news by the Food and Drug Administration (FDA) and explore how this affects an operational decision—production tool choice—of interventional cardiologists deciding between two types of cardiac stents. Analyzing 147,000 choices over 6 years, we find that individuals do respond to negative news by using the focal production tool less often. However, we find that both individual's own experience and others' experience alter their responses in predictable ways. Moreover, although individual and other experience act as substitutes prior to negative news, the two types of experience act as complements following the negative announcement—leading to even greater use of the same production tool. Two controlled lab studies replicate our main findings and show that behavioral biases, not rational expectations, drive the effect. Our research contributes not only to operations management research, but also to the practice of healthcare and operations more generally.

Keywords

Behavioral Operations; Egocentric Bias; Experience; Healthcare Operations; Prejudice and Bias; Behavior; Operations; Decision Making; Health Care and Treatment

Citation

Staats, Bradley R., Diwas S. KC, and Francesca Gino. "Blinded by Experience: Prior Experience, Negative News and Belief Updating." Harvard Business School Working Paper, No. 16-015, August 2015.
  • SSRN
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About The Author

Francesca Gino

Negotiation, Organizations & Markets
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More from the Authors
  • Mary Caroline Tillman at Egon Zehnder: Spotting Talent in the 21st Century By: Francesca Gino, Bradely R. Staats and Anne Marie Green
  • You Need Two Leadership Gears: Know When to Take Charge and When to Get Out of the Way By: Lindy Greer, Francesca Gino and Robert Sutton
  • Authentic First Impressions Relate to Interpersonal, Social, and Entrepreneurial Success By: David M. Markowitz, Maryam Kouchaki, Francesca Gino, Jeffrey T. Hancock and Ryan L. Boyd
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