Do Professionals Get It Right? Limited Attention and Risk-Taking Behavior

Reto Foellmi, Stefan Legge () and Lukas Schmid ()

No 1511, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

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.

Keywords: Risk Taking; Limited Attention; Left-Digit Bias (search for similar items in EconPapers)
JEL-codes: D03 D81 D83 L83 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2015-05
New Economics Papers: this item is included in nep-cbe and nep-upt
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Journal Article: Do Professionals Get It Right? Limited Attention and Risk‐taking Behaviour (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:econwp:2015:11

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