Warnings and Endorsements: Improving Human–AI Collaboration in the Presence of Outliers

Problem definition: Whereas artificial intelligence (AI) algorithms may perform well on data that are representative of the training set (inliers), they may err when extrapolating on nonrepresentative data (outliers). How can humans and algorithms work together to make better decisions when faced with outliers and inliers? Methodology/results: We study a human–AI collaboration on prediction tasks using a bias adjustment framework and hypothesize that humans tend toward naïve adjusting behavior: humans make adjustments to AI predictions that are too similar across inliers and outliers when, ideally, adjustments should be larger on outliers than inliers. In an online experiment, we demonstrate that participants are indeed unable to sufficiently differentiate their adjustments to an AI algorithm when faced with both inliers and outliers, leading to a 143%–176% increase in their absolute deviation from the optimal prediction compared with participants facing either all inliers or all outliers. We design a warning (an endorsement) that alerts participants when feature values constitute outliers (inliers), and in a second experiment, we show that this warning (endorsement) helps participants differentiate adjustments, reducing their absolute deviation from the optimal prediction by an average of 35% (28%). Deploying both interventions together reduces participants’ absolute deviation from the optimal prediction by 49%. In a third experiment, we demonstrate the robustness of warnings and endorsements in the presence of “fringeliers”—data points with features marginally outside the range of the training data set. Managerial implications: Our work details an important behavioral bias and identifies a simple educational intervention for mitigation. Ultimately, we hope that this work will help managers better equip their employees for human–AI collaboration. Funding: Funding was provided by Harvard Business School. Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2024.0854 .