INCIDENCE AND CONSEQUENCES OF RISK-TAKING BEHAVIOR IN TOURNAMENTS—EVIDENCE FROM THE NBA

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Abstract

We empirically explore the relevance and efficiency of risk-taking behavior in tournaments. We use data from the National Basketball Association (NBA) and measure risk-taking by the fraction of three-point shots in basketball games. We examine how point differences between teams during games affect their subsequent risk-taking behavior. It is found that teams that are trailing are more likely to increase their use of three-point shots. We additionally analyze the consequences of this change in behavior. Enhanced risk-taking is inefficient in the vast majority of cases and is only beneficial if a team is trailing by a rather large margin. We discuss possible explanations for these decision errors. (JEL M5, D81, J30)

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