The Loser’s Curse: Decision Making and Market Efficiency in the National Football League Draft

A question of increasing interest to researchers in a variety of fields is whether the biases found in judgment and decision-making research remain present in contexts in which experienced participants face strong economic incentives. To investigate this question, we analyze the decision making of National Football League teams during their annual player draft. This is a domain in which monetary stakes are exceedingly high and the opportunities for learning are rich. It is also a domain in which multiple psychological factors suggest that teams may overvalue the chance to pick early in the draft. Using archival data on draft-day trades, player performance, and compensation, we compare the market value of draft picks with the surplus value to teams provided by the drafted players. We find that top draft picks are significantly overvalued in a manner that is inconsistent with rational expectations and efficient markets, and consistent with psychological research.

The post The Loser’s Curse: Decision Making and Market Efficiency in the National Football League Draft appeared first on ADR Toolbox.

This post, The Loser’s Curse: Decision Making and Market Efficiency in the National Football League Draft,  by Cade Massey and Richard H. Thaler first appeared on  at http://www.adrtoolbox.com/.

Comment on this post

Leave a reply

AnAttorney.com
Reset Password

Warning: Unknown: write failed: No space left on device (28) in Unknown on line 0

Warning: Unknown: Failed to write session data (files). Please verify that the current setting of session.save_path is correct (/opt/bitnami/php/tmp) in Unknown on line 0