By Alex Krumer

 

Starting from the new millennium, an increasing number of academic studies have used sports data to investigate economic behavior. The main reason for such a popularity is the quality and availability of data. The idea is that if stones falling from towers and apples from trees are useful for physics, then data from sports competitions may be useful for economics. The point is that nature rarely creates a situation that allows a clear view of different phenomena because of the complexity of the real world. However, sports data allow to overcome such obstacles by providing an excellent laboratory to study human behavior in real competitive environments. As evidence, many articles that have used sports data were published in the top economic journals, including all traditional top five journals (AER, Econometrica, JPE, REStud and QJE).

In this article, I will present several examples of my co-authored studies that have used sports data to explain fundamental economic theories as well as articles that showed divergences of economic decision making from neo-classical theories. You can find additional references on economic studies that used sports data in the special issue on Behavioral Economics and Decision Making in Sports that will be published in the December issue of the Journal of Behavioral and Experimental Economics.

Intermediate Prizes and the Discouragement Effect in the Davis Cup

In a recent study that was published in European Economic Review, we investigated whether intermediate prizes have an effect on discouragement of contestants in multi-stage tournaments. According to discouragement effect, which often occurs in multi-stage contests (for example, R&D races, sales competitions, job promotions, political primaries, etc.), the lagging contestant reduces his effort, which is detrimental for the organizer of contest. Thus, the main question is how to mitigate that discouragement effect in multi-stage contests.

To answer this question, we took advantage of the change in the rules that appeared in Davis Cup tournament, which is the premier international team event in men’s tennis. According to this change, between 2009 and 2015, a player who won a single match received individual ranking points. In other years, there were no individual prizes for winning a single match. For the reader who is not familiar with professional tennis, these ranking points are taken into account in determining the World Ranking list. Based on this list, players enter the most prestigious tournaments with the possibility of earning large monetary prizes. To emphasize the importance of these points, it is worth mentioning that many players decided not to participate in the Rio 2016 Olympic tennis tournament in part because of the absence of ranking points in this tournament.

Thus, the change in the rules allowed us comparing the performance of players with and without these individual prizes (ranking points, in our case). We find that before the decision to assign ranking points for winning a single match, a favorite (higher ranked player) from the leading team had about 20 percentage points larger probability to win the decisive match than the favorite from the lagging team. However, between 2009 and 2015, the gap between the probabilities of the lagging and leading favorites’ winning disappeared. Our findings suggest that the introduction of intermediate prizes mitigates and may even eliminate the ahead-behind effects that arise in multi-stage contests.

Corrupt Norms and Soccer

In recent years there is a growing interest among economists to study the relationship between social norms and corrupt behavior. However, it is very difficult to find a clean rule-breaking real-life setting that allows to make a cross-country analysis. Nevertheless, in a study that was published in The Journal of Law, Economics and Organization, we were able to investigate the same real-life situation in 75 different countries where all participants faced with exactly the same task under fixed and known rules with high incentives for rule-breaking. More specifically, we utilized data from sensitive soccer games in which one team was in immediate danger of relegation to a lower division (Team A) and another team was not affected by the result (Team B).

We find that the more corrupt the country, the higher is the probability that Team A would achieve the desired result to avoid relegation. We also find that in the later stages of the following year, the probability that Team A would lose against Team B is significantly higher in more corrupt countries than in less corrupt countries. This finding may serve as evidence for reciprocation that is used as mechanism that drives the corrupt norms.

Our results suggest that despite the fact that all the participants compete under fixed and known rules that were determined by the soccer governing body, FIFA, and despite the fact that all teams face the exact same situation regarding the possible relegation to a lower division, the prevalence of corruption in the institutional environment where the games take place seems to shape behavior.

Choking in Front of Supportive Audiences in Biathlon

It is intuitive that performing in front of a supportive crowd increases motivation, since succeeding in front of familiar people who expect (and desire) a successful performance might be more satisfying. However, it can also be much more disappointing when the people closest to you witness your failure. Therefore, from an economic perspective, incentives to perform well are greater when in front of a supportive group. However, from the psychological point of view, an increased motivation beyond an optimal level may actually harm performance.

In a recent paper that was published in the Journal of Economic Behavior and Organization, we investigated shooting accuracy in the sport of biathlon, which is a sport that combines the endurance of free-technique cross-country skiing with precision small-bore rifle marksmanship. Studying the effect of competing in front of a supportive crowd in biathlon is feasible because unlike in other sports that involve precision tasks like soccer (penalty kicks) or basketball (free throws), every biathlete in every competition must perform the exact same non-interactive task of shooting the exact same number of times. In addition, the multistage nature of a biathlon season enables us to exploit within-biathlete variation.

We find that for both genders, biathletes from the top quartile of the ability distribution miss significantly more shots when competing in their home country compared to competing abroad. We also do not find that this result is driven by faster skiing. One plausible explanation to our results is that high audience expectations harm performance in a skill-based task. As evidence, the World Cup winners from both genders (Gabriela Koukalova and Martin Fourcade) said that it was very emotional to compete in their home countries and also much tougher than competing abroad because of greater expectations. These statements of top biathletes along with our results obtained in real-life settings, as well as previous evidence from laboratory settings, suggest that the most talented biathletes are more likely to choke when undertaking a precision task because of the high expectations generated by the friendly environment.

Psychological Momentum in Judo

Two distinct types of momentum are known to exist in the contest literature: strategic momentum and psychological momentum. Strategic momentum is generally generated by strategic incentives inherent in the contest. Psychological momentum, on the other hand, is the tendency of an outcome to be followed by a similar outcome not caused by any strategic incentive of the players.

Identifying the causal effect of psychological momentum on performance involves two main challenges. First, in most multi-stage contests, psychological and strategic momentum coexist. Second, in most settings a player gains a momentum advantage over his opponent by performing better in previous stages of the contest so it is generally an endogenous variable.

A paper that was published in Journal of Economic Behavior and Organization investigated the effect of psychological momentum in bronze medal fights in professional judo. Two special features of these fights allow to overcome the above-mentioned challenges. First, the contest we used included only one and the last stage of the tournament, thereby eliminating strategic considerations. Second, both contestants reach the bronze medal fight after winning all their previous fights except for one. However, one contestant reaches this fight after winning his/her last fight but losing his/her second-to-last one (hereafter this contestant is referred to as LW), while the other contestant reaches this fight after losing his last fight but winning his second-to-last one (hereafter this contestant is referred to as WL). Thus, the LW contestant has a clear psychological momentum advantage over the WL contestant since he/she reaches the fight after winning while his opponent reaches the fight after losing.

We find that having a psychological momentum advantage significantly increases the winning probability in men’s fights, but not in women’s fights. This result is consistent with the biological literature on the effect of innate testosterone levels on performance that has shown that while higher testosterone levels enhance performance of both men and women, it commonly increases following victory and decreases following loss only among men. Since it has been shown that testosterone levels increase in men after various types of success and not only after winning in sports, it is likely that the role of testosterone in reinforcing future success may extend to other areas. For example, momentum can create price bubbles in financial markets. Thus, an increased share of women traders in the market might reduce the creation of such bubbles.

 

Alex Krumer
Alex Krumer is a professor of sports economics at Faculty of Business Administration and Social Sciences at Molde University College in Norway. His main fields of interest are Behavioral Economics, Gender Economics, Favoritism and Corruption, Sports Economics, Operational Research and Contest Theory. The focus of his research is on contest design and its effects on performance in real competitive settings.
Alex Krumer

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