ECON 440: Reading - Tiger Woods Loss Averse

Questions and Answers

What key behavioral bias is examined in the paper as a component of Prospect Theory?

Confirmation bias

Framing effect

Loss aversion (correct)

Herd behavior

Which type of shots do professional golfers focus on in the analysis of loss aversion?

Drives off the tee

Putts for par and other scores (correct)

Bunker shots

Approach shots

What is the PGA Tour characterized by in terms of the participants involved?

Golfers competing at various skill levels

Amateur golfers with little experience

Mixed groups of professional and amateur golfers

Professional golfers with extensive experience (correct)

What statistical method is used in the study to analyze more than 2.5 million putts?

Laser measurements Signup and view all the answers

In the context of testing loss aversion, what reference score is used for comparison?

Par Signup and view all the answers

What is the expected outcome of golfers comparing putts for par versus scores different from par?

Increased loss aversion impact Signup and view all the answers

Which research support is acknowledged for assisting with the utilization of ShotLink data?

Bob Batt Signup and view all the answers

Which group is noted for providing funding to support the research discussed?

The Wharton Sports Business Initiative Signup and view all the answers

How does the accuracy of golfers when attempting birdie putts compare to their accuracy for par putts?

Golfers are less accurate with birdie putts than par putts. Signup and view all the answers

What psychological phenomenon is suggested to explain why golfers focus more on par putts?

Loss aversion Signup and view all the answers

In which round of a tournament is the accuracy gap between par and birdie putts the largest?

First round Signup and view all the answers

Which of the following is not a competing explanation for the accuracy gap identified between birdie and par putts?

General fatigue in golfers Signup and view all the answers

What is the main finding regarding putt attempts from different positions on the green?

Birdie putts may start from a longer distance than par putts. Signup and view all the answers

What method was used to compare the accuracy of par and birdie putts?

Control methods and matching estimators Signup and view all the answers

What concept explains why economic agents value losses more than equivalent gains?

Loss Aversion Signup and view all the answers

In which circumstance are individuals more likely to accept an aggregated gamble despite aversion to small, positive expected gambles?

When evaluating decisions infrequently Signup and view all the answers

What impact do tournament-specific factors have on the accuracy of golfers' putts?

They may introduce bias in the accuracy results. Signup and view all the answers

Which of the following best summarizes the relationship between tournament progress and putt accuracy?

Accuracy gaps decrease as the tournament progresses. Signup and view all the answers

What did Daniel Read and colleagues refer to when they analyzed how individuals organize their decision-making process?

Narrow Bracketing Signup and view all the answers

How do economic agents typically behave regarding risks associated with gains compared to losses?

Risk seeking in losses, risk averse in gains Signup and view all the answers

What effect does frequent evaluation of portfolios have on decision making according to Benartzi and Thaler's study?

It increases the acceptance of aggregated decisions Signup and view all the answers

Which aspect of the utility function represents how people value gains versus losses in Prospect Theory?

Convexity in losses and concavity in gains Signup and view all the answers

What implication does loss aversion have for an individual's decision to segregate related choices?

It may lead to rejecting positive gambles Signup and view all the answers

What has research suggested about the effects of experience and large stakes on decision errors related to loss aversion?

It completely eliminates decision errors Signup and view all the answers

What reference point becomes more salient for golfers later in a Tournament?

Scores of competitors Signup and view all the answers

According to Prospect Theory, how do golfers respond when putting for birdie compared to putting for par?

They are more cautious with birdie putts Signup and view all the answers

What does the term 'risk shift' in Prospect Theory imply about golfer behavior?

Golfers become more risk averse when winning Signup and view all the answers

What is indicated about golfers' strategies when faced with putting for birdie in the context of expected profits?

They sacrifice potential success for easier follow-up putts Signup and view all the answers

What is the purpose of assigning a par value to each hole on a PGA Tour course?

To indicate the expected number of strokes a skilled golfer needs Signup and view all the answers

How is expectation viewed in the context of reference points according to recent theoretical work?

As a functional reference point for decisions Signup and view all the answers

What key aspect does the evidence demonstrate regarding even elite golfers like Tiger Woods?

They exhibit loss aversion in high-stakes situations Signup and view all the answers

Which of the following statements is true regarding the PGA Tour Tournament format?

Only players who finish in the top third after the second round continue Signup and view all the answers

In reference to the study’s structure, what is included in Section IV?

Presentation of results and ruling out explanations Signup and view all the answers

In the context of scoring in golf, what does shooting a 'double bogey' indicate?

The golfer completed the hole in two strokes over par Signup and view all the answers

What proportion of the total purse does the winner typically receive in a PGA Tour event?

18 percent Signup and view all the answers

What is one outcome of golfers adopting different reference points throughout a Tournament?

Variation in putting strength and strategy Signup and view all the answers

What is 'stroke play' in the context of professional golf competitions?

The most common method of scoring where total strokes are counted Signup and view all the answers

What happens to golfers who finish a tournament with the lowest scores?

They win the Tournament Signup and view all the answers

Which element is used on scorecards to represent holes shot over par?

A square Signup and view all the answers

How many tournaments typically make up a PGA Tour season?

40 to 50 Signup and view all the answers

Study Notes

Field Evidence of Loss Aversion in Golf

Examination of loss aversion as a key component of Prospect Theory, emphasizing its impact on decision-making.
Focus on the PGA Tour, where professional golfers compete in high-stakes tournaments.
Analysis of over 2.5 million putts with precise laser measurements to study performance related to the reference point of par.

Key Findings on Putting Performance

Golfers show reduced accuracy when putting for birdie (one stroke under par) compared to putting for par or bogey.
On average, golfers succeed in making birdie putts approximately 2% less often than par putts.
The influence of the par reference point leads golfers to focus more on avoiding losses than gaining advantages.

Competing Explanations Ruling Out

Detailed analysis rules out other factors affecting putt success, such as prior experience on the green or differences in player skill levels.
Control methods were employed, matching putts attempted within an inch on the same hole in the same tournament.

Impact of Tournament Rounds

The accuracy gap between birdie and par putts is most pronounced in early tournament rounds, diminishing by the final round.
As the tournament progresses, the salience of competing scores becomes more relevant than the par reference point.

Risk Aversion Predictions

Consistent with Prospect Theory, golfers exhibit greater caution when attempting birdie putts compared to par putts.
Golfers tend to hit birdie putts softer and often leave them short of the hole, sacrificing potential success to minimize the risk of difficult follow-up putts.

Reference Point and Expectations

Study tests the idea of endogenous reference points, showing that golfers adjust their expectations based on their anticipated performance relative to par.
Evidence suggests that expectations influence the reference points adopted by golfers during play, reinforcing the connection to loss aversion.

Implications of Research

Findings demonstrate that loss aversion persists even among elite athletes like Tiger Woods, highlighting its relevance in high-pressure environments.
Contributes to literature by showing that behavioral biases like loss aversion manifest in competitive settings with experienced professionals.

Overview of the PGA Tour

PGA Tour includes 40-50 tournaments annually, with approximately 150 golfers competing in each event.
Structure consists of four rounds of 18 holes, eliminating the bottom third of players after the second round, with the remaining players vying for a significant prize purse.

Fundamentals of Golf Scoring

Each hole has a par value (3, 4, or 5), guiding expectations for performance.
Scoring terminology includes birdies (under par), bogeys (over par), and the significance of performance is indicated by special notations on scorecards (circles for birdies, squares for bogeys).

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