Outcome uncertainty, home-win preference, and econometric identification of the game uncertainty–attendance relationship

Dennis Coates and Brad Humphreys

Chapter 11 in Outcome Uncertainty in Sporting Events, 2020, pp 162-172 from Edward Elgar Publishing

Abstract: A growing body of research addresses the theoretical basis for the uncertainty of outcome hypothesis (UOH), in the context of alternative models of consumer choice under uncertainty, and assesses empirical evidence supporting the UOH, and an alternative explanation for observed variation in game-level attendance at sporting events, the presence of fans with reference-dependent preferences and loss aversion (RDP/LA). Humphreys and Zhou demonstrate that structural econometric tests of the UOH versus RDP/LA using game-level data will be influenced by an econometric identification problem. Consumers’ attendance decisions will, in general, be influenced by three parameters reflecting (1) preference for outcome uncertainty, (2) loss aversion, and (3) home-win preference. Structural econometric models identify these three parameters with only two variables: objective home-win probability and objective home-win probability squared. This identification problem may explain the lack of consensus in empirical tests of the UOH versus RDP/LA.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2020
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