Own experience bias in evaluating the efforts of others

We develop a model with which to explore how an individuals own experience in the labor market may influence her assessment of the efforts of other individuals. Specifically, we consider a two stage process in which individuals first learn, through experience, whether effort is rewarded and then subsequently have to estimate the effort of others. We derive a theoretical benchmark based on rational inference and then explore how own experience may lead to systematic bias from this benchmark. Our theoretical results suggest that those who are not rewarded for high effort will underestimate the effort of other individuals while those for whom effort is rewarded will (slightly) overestimate the effort of others. We empirically test and confirm this prediction in the lab.