Is Tiger Woods Loss Averse? Persistent Bias in the Face of Experience, Competition, and High Stakes

Abstract

Although experimental studies have documented systematic decision errors, many leading scholars believe that experience, competition, and large stakes will reliably extinguish biases. We test for the presence of a fundamental bias, loss aversion, in a high-stakes context: professional golfers' performance on the PGA Tour. Golf provides a natural setting to test for loss aversion because golfers are rewarded for the total number of strokes they take during a tournament, yet each individual hole has a salient reference point, par. We analyze over 2.5 million putts using precise laser measurements and find evidence that even the best golfers-including Tiger Woods-show evidence of loss aversion.

A theory of price adjustment under loss aversion

“…Kőszegi and Rabin (2006, 2007, 2009) and Heidhues and Kőszegi (2005 argue that reference points are determined by agents' rational expectations about outcomes from the recent past. There is much empirical evidence suggesting that reference points are determined by expectations, in concrete situations such as in police performance after final offer arbitration (Mas, 2006), in the United States TV show "Deal or no Deal" (Post et al, 2008), with respect to domestic violence (Card and Dahl, 2011), in cab drivers' labor supply decisions (Crawford and Meng, 2011), or in the effort choices of professional golf players (Pope and Schweitzer, 2011). In the context of laboratory experiments, Knetsch and Wong (2009) (2011) do so through an effort provision experiment.…”

Three point shooting and efficient mixed strategies: A portfolio management approach

“…This investment theory approach to identifying optimal mixed strategies also highlights the importance of risk aversion in the NBA. For example, professional golfers, playing for large prizes in golf tournaments, show evidence of loss aversion (Pope & Schweitzer, 2011). Professional football coaches, when making decisions about whether to 'go for it' on fourth down, show similar behavior (Romer, 2006).…”

Expectations as Reference Points: Field Evidence from Professional Soccer

“…Our paper is however different in that we analyze behavior by players and coaches during matches, i.e., behavior that can influence the state of being in a loss frame, while Card and Dahl analyze violent and futile reactions to unchangeable facts. Also related to our paper is Pope and Schweitzer (2011) who analyze professional golfers' performance. 2 They find that golfers are significantly influenced by the reference point that is provided by "par," the typical number of strokes that a professional golfer takes to complete a hole.…”