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Do Professionals Get It Right? Limited Attention and Risk‐taking Behaviour

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  • Reto Foellmi
  • Stefan Legge
  • Lukas Schmid

Abstract

Does information processing affect individual risk-taking behavior? In this paper, we provide evidence that professional athletes suffer from a left-digit bias when dealing with signals about differences in performance. Using data from the highly competitive field of World Cup alpine skiing for the period of 1992-2014, we show that athletes misinterpret actual differences in race times by focusing on the leftmost digit, resulting in increased risk-taking behavior. For the estimation of causal effects, we exploit the fact that tiny time differences can be attributed to random shocks. We link our findings to prior research in psychology and economics, suggesting that different ways of information processing can explain our results. In contrast to recent studies in the field of behavioral economics, we then argue that high stakes and individual experience can magnify behavioral biases.
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  • Reto Foellmi & Stefan Legge & Lukas Schmid, 2016. "Do Professionals Get It Right? Limited Attention and Risk‐taking Behaviour," Economic Journal, Royal Economic Society, vol. 0(592), pages 724-755, May.
    • Handle: RePEc:wly:econjl:v::y:2016:i:592:p:724-755
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    File URL: https://hdl.handle.net/10.1111/ecoj.2016.126.issue-592
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    Cited by:

    1. Joshua Goodman & Oded Gurantz & Jonathan Smith, 2020. "Take Two! SAT Retaking and College Enrollment Gaps," American Economic Journal: Economic Policy, American Economic Association, vol. 12(2), pages 115-158, May.
    2. Armando N. Meier, 2021. "Emotions and Risk Attitudes," SOEPpapers on Multidisciplinary Panel Data Research 1118, DIW Berlin, The German Socio-Economic Panel (SOEP).
    3. Armando N. Meier, 2019. "Emotions, Risk Attitudes, and Patience," SOEPpapers on Multidisciplinary Panel Data Research 1041, DIW Berlin, The German Socio-Economic Panel (SOEP).
    4. Dainis Zegners & Uwe Sunde & Anthony Strittmatter, 2020. "Decisions and Performance Under Bounded Rationality: A Computational Benchmarking Approach," Papers 2005.12638, arXiv.org, revised Dec 2020.
    5. Christoph Buehren & Martin Gschwend & Alex Krumer, 2022. "Feedback, Gender, and Choking under Pressure: Evidence from Alpine Skiing," MAGKS Papers on Economics 202237, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    6. Bühren, Christoph & Gschwend, Martin & Krumer, Alex, 2024. "Expectations, gender, and choking under pressure: Evidence from alpine skiing," Journal of Economic Psychology, Elsevier, vol. 100(C).
    7. Legge, Stefan & Schmid, Lukas, 2016. "Media attention and betting markets," European Economic Review, Elsevier, vol. 87(C), pages 304-333.
    8. Matthew Gould & Matthew D. Rablen, 2019. "Are World Leaders Loss Averse?," CESifo Working Paper Series 7763, CESifo.
    9. Czibor, Eszter & Claussen, Jörg & van Praag, Mirjam, 2019. "Women in a men’s world: Risk taking in an online card game community," Journal of Economic Behavior & Organization, Elsevier, vol. 158(C), pages 62-89.
    10. Thomas Cyron & Marcel Garz & Norbert Steigenberger, 2024. "Beware the community type: engagement and growth in core vs. open online communities," Small Business Economics, Springer, vol. 62(4), pages 1383-1407, April.
    11. Garz, Marcel, 2018. "Effects of unemployment news on economic perceptions – Evidence from German Federal States," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 172-190.
    12. Marta Boczoń & Alistair J. Wilson, 2023. "Goals, Constraints, and Transparently Fair Assignments: A Field Study of Randomization Design in the UEFA Champions League," Management Science, INFORMS, vol. 69(6), pages 3474-3491, June.

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    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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