The Feedback Fallacy: Praise, Criticism, and Regression to the Mean

Participants in the role of principal observe an agent's interim performance on a task and may send a verifiable feedback message. Agents subsequently choose effort for a final stage.

2026-06-08

2026-10-01

Principal's binary message choice conditional on a high first-stage outcome (Well Done vs. no message), modeled as a function of cumulative prior disappointing experience with praise.

"Disappointing experience with praise" is constructed as the cumulative count of prior rounds in which the principal sent "Well Done" and the subsequent second-stage outcome was not high.

Agent's second-stage effort, modeled as a function of received feedback message and first-stage effort.
Frequency of performance reversion: proportion of cases in which a high first-stage outcome is followed by a non-high second-stage outcome, and proportion of cases in which a low first-stage outcome is followed by a non-low second-stage outcome.
Principal's binary message choice conditional on a low first-stage outcome (Not Good Enough vs. no message), as a function of cumulative prior encouraging experience with criticism.

Encouraging experience with criticism" is the cumulative count of prior rounds in which the principal sent "Not Good Enough" and the subsequent second-stage outcome was not low. All cumulative experience variables are lagged and constructed only from prior rounds.

Computerized laboratory experiment using a principal-agent design with 20 rounds and stranger matching. Participants are randomly assigned to fixed roles (principal or agent) at the session start. In each round, principals observe an agent's interim performance on a two-stage task and may send a verifiable feedback message before the agent chooses effort for the final stage. Sessions are conducted at the BELA laboratory at NES.

Not available

Random assignment by the z-Tree software at the session start (for role assignment) and at the start of each round (for pair rematching).

Individual within session for role assignment (principal vs. agent); pair-level for stranger matching across rounds. All participants within a session are exposed to the same procedure.

No

4-6 experimental sessions

70-100 participants (35-50 principals, 35-50 agents); 20 rounds per participant, generating 1400-2000 round-level observations per role

Not applicable: the study does not use between-subjects treatment arms. All participants experience the same protocol; variation in feedback received by agents is generated endogenously by principals' decisions conditional on observed outcomes.

Power analysis is conducted via simulation calibrated to pilot estimates of the relationship between cumulative disappointing experience with praise and the probability that a principal sends a "Well Done" message conditional on a high first-stage outcome. With the planned recruitment of 35–50 principals (70–100 participants in total) across approximately four to six sessions, the design achieves at least 80% power at α=0.05 to detect effects as small as 50% of the pilot point estimate. At N=40 principals, power exceeds 91% under a 50% effect-size attenuation and remains above 70% under a 75% attenuation (i.e., when the true effect is only one-quarter of the pilot estimate). With the planned recruitment of 35–50 principals, the design achieves at least 80% power at α=0.05 to detect effects as small as 50% of the pilot point estimate. At N=40 principals, power exceeds 91% under a 50% effect-size attenuation and remains above 70% under a 75% attenuation (i.e., when the true effect is only one-quarter of the pilot estimate).