Do Professionals Get It Right? Limited Attention and Risk‐taking Behaviour

Does information processing affect individual risk-taking behavior? In this paper, we provide evidence that professional athletes suffer from a left-digit bias when dealing with signals about differences in performance. Using data from the highly competitive field of World Cup alpine skiing for the period of 1992-2014, we show that athletes misinterpret actual differences in race times by focusing on the leftmost digit, resulting in increased risk-taking behavior. For the estimation of causal effects, we exploit the fact that tiny time differences can be attributed to random shocks. We link our findings to prior research in psychology and economics, suggesting that different ways of information processing can explain our results. In contrast to recent studies in the field of behavioral economics, we then argue that high stakes and individual experience can magnify behavioral biases.(This abstract was borrowed from another version of this item.)