Play it Again! A Natural Experiment on Definitivity Avoidance

42 Pages Posted: 9 Aug 2019 Last revised: 23 Sep 2019

See all articles by Thomas Bassetti

Thomas Bassetti

University of Padua - Department of Economics

Stefano Bonini

Stevens Institute of Technology - School of Business

Fausto Pacicco

LIUC - Università Cattaneo

Filippo Pavesi

Università Carlo Cattaneo (LIUC) - Institute of Economics; Stevens Institute of Technology - School of Business

Date Written: September 19, 2019

Abstract

Behavioral biases affect a large number of human decisions, many of which have relevant welfare effects. We identify a bias that we denote as "reversibility bias" and explore how the introduction of explicit exposure mechanisms can contribute to attenuate it. To do this, we exploit a unique natural experiment - the introduction of a decision review system represented by player challenges and the associated Hawk-Eye technology in professional tennis. This experiment allows us to identify the bias, by illustrating that if such a bias exists, the challenge rule should reduce the number of calls that postpone the assignment of a point. Our findings may have significant policy implications providing a conceptual framework for the design of institutions to alleviate the welfare costs associated with reversibility bias in different contexts, such as court rulings, human resource management and debt roll-over decisions.

Keywords: Prospect Theory; Natural experiment; Uncertainty

JEL Classification: D81, D91, C93

Suggested Citation

Bassetti, Thomas and Bonini, Stefano and Pacicco, Fausto and Pavesi, Filippo, Play it Again! A Natural Experiment on Definitivity Avoidance (September 19, 2019). Available at SSRN: https://ssrn.com/abstract=3432981 or http://dx.doi.org/10.2139/ssrn.3432981

Thomas Bassetti

University of Padua - Department of Economics ( email )

via Del Santo 33
Padova, 35123
Italy

Stefano Bonini (Contact Author)

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Fausto Pacicco

LIUC - Università Cattaneo ( email )

Corso Matteotti
Castellanza (VA)
Italy

Filippo Pavesi

Università Carlo Cattaneo (LIUC) - Institute of Economics ( email )

21053 Castellanza (VA)
Italy

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

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