Thomas Bassetti, Department of Economics and Management, University of Padova Stefano Bonini, Stevens Institute of Technology Fausto Pacicco, LIUC Università Carlo Cattaneo Filippo Pavesi, LIUC Università Carlo Cattaneo and Stevens Institute of Technology Play it again! A Natural Experiment on Reversibility Bias August 2019 Marco Fanno Working Papers - 238 Play it again! A Natural Experiment on Reversibility Bias Thomas Bassetti∗ Stefano Boniniy Fausto Paciccoz Filippo Pavesi§ Abstract Behavioral biases affect a large number of human decisions, many of which have relevant welfare effects. We identify a bias that we denote as "reversibility bias" and explore how the introduction of explicit exposure mechanisms can contribute to attenuate it. To do this, we exploit a unique natural experiment - the introduction of a decision review system represented by player challenges and the associated Hawk-Eye technology in professional tennis. This experiment allows us to identify the bias, by illustrating that if such a bias exists, the challenge rule should reduce the number of calls that postpone the assignment of a point. Our findings may have significant policy implications provid- ing a conceptual framework for the design of institutions to alleviate the welfare costs associated with reversibility bias in different contexts, such as court rulings, human resource management and debt roll-over decisions. JEL Classification Code: D81, D91, C93 Keyword: Prospect Theory; Natural experiment; Uncertainty. ∗University of Padua, Department of Economics and Management "Marco Fanno", Via del Santo 33, 35123 Padova, Italy,
[email protected] yStevens Institute of Technology. Address: School of Business, Stevens Institute of Technology, 1 Castle Point on Hudson, Hoboken, NJ 07030, USA,
[email protected] zLIUC Università Carlo Cattaneo, C.so Matteotti, 22, 21053 Castellanza (VA), Italy,
[email protected] §LIUC Università Carlo Cattaneo, C.so Matteotti, 22, 21053 Castellanza (VA), Italy and Stevens Institute of Technology,
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