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

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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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Document Type: Research Article

Affiliations: 1: Department of Business and Economics, RWTH Aachen University, Templergraben 64, Aachen 52056, Germany. Phone 492418093355, Fax: 492418093356 2: Department of Business and Economics, University of Wuerzburg, Sanderring 2, Wuerzburg 97070, Germany. Phone 499313180222, Fax: 499313182105 3: Department of Business and Economics, University of Wuerzburg, Sanderring 2, Wuerzburg 97070, Germany. Phone 499313182754, Fax: 499313182105

Publication date: April 1, 2013

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