The Losing Side of An Athlete
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2013
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Haverford College. Department of Economics
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Award
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eng
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Open Access
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Abstract
Many professional athletes have reported losing huge sums of money due to gambling problems. Research has shown that college athletes gamble at a higher rate than college non-athletes. However, this research overlooks one of the main aspects of gambling. Gambling can be decomposed into two parts: uncertainty over monetary outcomes, and atmosphere driven conditions such as increased adrenaline caused by being in a casino. Previous studies do not measure the former component even though it can be controlled for in a laboratory setting. Therefore, we contribute to the existing literature by designing and conducting a three-part experiment in which participants make a series of choices that include uncertain monetary outcomes. The results enable us to compare athletes and non-athletes’ levels of loss-aversion as well as risk-aversion. We find evidence that athletes are more risk-averse than non-athletes before incurring any gains or losses. There are also strong indications that athletes are more loss-averse than non-athletes, which should not be a surprise considering that athletes are conditioned (and have rational reasons) to be loss-averse in the points domain in sport. In somewhat of a contrast, non-athletes seem to value winning money just as much as athletes do. Furthermore, we originally hypothesized that athletes who were in gains would be more risk-averse than non-athletes in gains in order to preserve their winnings. However, this is not the case as there is no significant difference in the decisions of athletes in gains and non-athletes in gains.