Do Firms Maximize? Evidence from Professional Football
David H. Romer
University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)
Journal of Political Economy, Vol. 114, pp. 340-365, April 2006
This paper examines a single, narrow decision - the choice on fourth down in the National Football League between kicking and trying for a first down - as a case study of the standard view that competition in the goods, capital, and labor markets leads firms to make maximizing choices. Play-by-play data and dynamic programming are used to estimate the average payoffs to kicking and trying for a first down under different circumstances. Examination of actual decisions shows systematic, clear-cut, and overwhelmingly statistically significant departures from the decisions that would maximize teams' chances of winning. Possible reasons for the departures are considered.
Date posted: May 17, 2006
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