LOG904-174 Decision Making and Incentives in Competitive Environments (Autumn 2021)

About the course

Learning and testing economic, management and business theories by using data from real competitive situations that appear in professional sports.

Frederick Winslow Taylor was one of the first management consultants. His fantasy was to observe and measure every aspect of worker’s performance to improve industrial efficiency.

Sports industry is a marvellous laboratory for testing and applying business and management theories. This is because in professional sports contestants compete in real competitive settings that involve high-stake decisions that are familiar to agents. As such, it provides a unique opportunity to observe and measure performance in situations that involve features such as pressure, incentives, heterogeneity in abilities, etc.

Obviously, such situations commonly appear in the workplace or in other tournament related environments. For example, it is important to better understand situations that may provoke pressure, which may be caused by increased incentives. Another important feature that is common to sports and the "usual" industry relates to the order of actions that may have an effect on contestants' performance in multi-stage contests such as R&D competitions, job promotions and even in political races (how and when to invest in the US primaries', for example). The importance of schedule stems from the fact that an unfair order of actions that provides an ex-post advantage to one of the contestants may harm efficiency by reducing the probability of the ‘better’ contestant to win. It can also harm contestants’ future’s revenues and therefore affect their willingness to exert efforts in the present. This can result in a reduced productivity and profit.

This course presents evidence from sports data that provides us with insights into various aspects of human behaviour, including – among others – preferences for competition, behaviour in competitive environments in general and various kinds of tournaments in particular, psychological aspects affecting performance, or strategic decision making by individuals or by teams.

The course is connected to the following study programs

• Master of Science in Logistics
• Experience-based Master in Logistics
• Master of Science in Sustainable Energy Logistics
• Exchange programme - Master's level
• Master of Science in Sustainable Transport and Urban Mobility

Recommended requirements

Statistics.

Examination

In the beginning of the course the students will create teams of 2-3 persons. Every team will have to present one academic paper from the list below (papers for students’ presentations). The students will have to present the main motivation of the paper, data and environment used and the main results without going into mathematical issues that might appear in the papers.

Final grade:

• Presentation of a paper- 15% of the final grade.

• Final exam- 85% of the final grade.

Syllabus

References:

Bar-Eli, M., Krumer, A. and Morgulev, E., 2020. Ask not what economics can do for sports-Ask what sports can do for economics. Journal of Behavioral and Experimental Economics, 89, 101597.

Berger, J. and Pope, D., 2011. Can losing lead to winning?. Management Science, 57(5), pp.817-827.

Brown, J., 2011. Quitters never win: The (adverse) incentive effects of competing with superstars. Journal of Political Economy, 119(5), pp.982-1013.

Cohen-Zada, D., Krumer, A. and Shtudiner, Z., 2017. Psychological momentum and gender. Journal of Economic Behavior & Organization, 135, pp.66-81.

Cohen-Zada, D., Krumer, A., Rosenboim, M. and Shapir, O.M., 2017. Choking under pressure and gender: Evidence from professional tennis. Journal of Economic Psychology, 61, pp.176-190.

Cohen-Zada, D., Krumer, A. and Shapir, O.M., 2018. Testing the effect of serve order in tennis tiebreak. Journal of Economic Behavior & Organization, 146, pp.106-115.

Dohmen, T.J., 2008. Do professionals choke under pressure?. Journal of Economic Behavior & Organization, 65(3), pp.636-653.

Elaad, G., Krumer, A. and Kantor, J., 2018. Corruption and sensitive soccer games: cross-country evidence. The Journal of Law, Economics, and Organization, 34(3), pp.364-394.

Garicano, L., Palacios-Huerta, I. and Prendergast, C., 2005. Favoritism under social pressure. The Review of Economics and Statistics, 87(2), pp.208-216.

Harb-Wu, K. and Krumer, A., 2019. Choking under pressure in front of a supportive audience: Evidence from professional biathlon. Journal of Economic Behavior & Organization, 166, pp.246-262.

Iqbal, H. and Krumer, A., 2019. Discouragement effect and intermediate prizes in multi-stage contests: Evidence from Davis Cup. European Economic Review, 118, pp.364-381.

Kahn, L.M., 2000. The sports business as a labor market laboratory. The Journal of Economic Perspectives, 14(3), pp.75-94.

Krumer, A., 2020. Pressure versus ability: Evidence from penalty shoot-outs between teams from different divisions. Journal of Behavioral and Experimental Economics, 89, 101578.

Krumer, A. and Lechner, M., 2017. First in first win: Evidence on schedule effects in round-robin tournaments in mega-events. European Economic Review, 100, pp.412-427.

Krumer, A., Otto, F. and Pawlowski, T., Nationalistic bias among international experts: Evidence from professional ski jumping.

Krumer, A., Shavit, T. and Rosenboim, M., 2011. Why do professional athletes have different time preferences than non-athletes?. Judgment & Decision Making, 6(6).

Malueg, D.A. and Yates, A.J., 2010. Testing contest theory: evidence from best-of-three tennis matches. The Review of Economics and Statistics, 92(3), pp.689-692.

Szymanski, S., 2003. The economic design of sporting contests. Journal of Economic Literature, 41(4), pp.1137-1187.

 

Papers for students’ presentations:

1. Alavy, K., Gaskell, A., Leach, S. and Szymanski, S., 2010. On the edge of your seat: Demand for football on television and the uncertainty of outcome hypothesis. International Journal of Sport Finance, 5(2), p.75.

2. Bar-Eli, M., Azar, O.H., Ritov, I., Keidar-Levin, Y. and Schein, G., 2007. Action bias among elite soccer goalkeepers: The case of penalty kicks. Journal of economic psychology, 28(5), pp.606-621.

3. Berger, J. and Nieken, P., 2016. Heterogeneous contestants and the intensity of tournaments: An empirical investigation. Journal of Sports Economics, 17(7), pp.631-660.

4. Ehrenberg, R.G. and Bognanno, M.L., 1990. Do tournaments have incentive effects?. Journal of political Economy, 98(6), pp.1307-1324.

5. Gilsdorf, K.F. and Sukhatme, V.A., 2008. Testing Rosen's sequential elimination tournament model: Incentives and player performance in professional tennis. Journal of Sports Economics, 9(3), pp.287-303.

6. Hickman, D.C. and Metz, N.E., 2015. The impact of pressure on performance: Evidence from the PGA TOUR. Journal of Economic Behavior & Organization, 116, pp.319-330.

7. Jetter, M. and Walker, J.K., 2015. Game, set, and match: Do women and men perform differently in competitive situations?. Journal of Economic Behavior & Organization, 119, pp.96-108.

8. Kendall, G. and Lenten, L.J., 2017. When sports rules go awry. European Journal of Operational Research, 257(2), pp.377-394.

9. Meier, P., Flepp, R., Ruedisser, M. and Franck, E., 2020. The Advantage of Scoring Just Before the Half-Time Break—Pure Myth? Quasi-Experimental Evidence From European Football. Journal of Sports Economics, p.1527002520913102.

10. Mesagno, C. and Mullane-Grant, T., 2010. A comparison of different pre-performance routines as possible choking interventions. Journal of Applied Sport Psychology, 22(3), pp.343-360.

11. Nevill, A.M., Balmer, N.J. and Williams, A.M., 2002. The influence of crowd noise and experience upon refereeing decisions in football. Psychology of Sport and Exercise, 3(4), pp. 261−272.

12. Ponzo, M. and Scoppa, V., 2018. Does the home advantage depend on crowd support? Evidence from same-stadium derbies. Journal of Sports Economics, 19(4), pp.562-582.

13. Pope, B.R., Pope, N.G., 2015. Own-nationality bias: evidence from UEFA Champions League football referees. Economic Inquiry 53 (2), 1292-1304.

14. Pope, D.G., Price, J. and Wolfers, J., 2018. Awareness reduces racial bias. Management Science, 64(11), pp.4988-4995.

15. Price, J. and Wolfers, J., 2010. Racial discrimination among NBA referees. The Quarterly Journal of economics, 125(4), pp.1859-1887.

16. Schreyer, D., Schmidt, S.L. and Torgler, B., 2016. Against all odds? Exploring the role of game outcome uncertainty in season ticket holders’ stadium attendance demand. Journal of Economic Psychology, 56, pp.192-217.

17. Sonnabend, H., On discouraging environments in team contests: Evidence from top‐level beach volleyball. Managerial and Decision Economics.

18. Szymanski, S., 2000. A market test for discrimination in the English professional soccer leagues. Journal of Political Economy, 108(3), pp.590-603.

19. Zhang, L., 2017. A fair game? Racial bias and repeated interaction between NBA coaches and players. Administrative Science Quarterly, 62(4), pp.603-625.