It's Not About the Money: The Role of Preferences, Cognitive Biases and Heuristics Among Professional Athletes
70 Pages Posted: 14 Oct 2005
Professional athletes are often regarded as selfish, greedy, and out-of-touch with regular people. They hire agents who are vilified for negotiating employment contracts that occasionally yield compensation in excess of national gross domestic products. Professional athletes are thus commonly assumed to most value economic remuneration, rather than the love of the game or some other intangible, romanticized inclination.
Lending credibility to this intuition is the rational actor model, a law and economic precept which presupposes that when individuals are presented with a set of choices, they rationally weigh costs and benefits, and select the course of action that maximizes their wealth, happiness, or satisfaction. Since athletes are generally presumed to most value financial compensation, they simply behave rationally by selecting the most lucrative offer.
Intriguingly, however, for every apparent athletic mercenary, there appear to be many who significantly discount financial compensation. Indeed, for a variety of expressed motivations, professional athletes regularly select the non-optimal contract offer, at least in a traditional sense of optimality. Risk aversion and other deliberative strategies occasionally provide explanation, but more often explanatory is value in intangibles, such as loyalty, regional affinity, weather preferences, familiarity with certain teammates or coaches, prospects for team success, and demographic traits.
A law and economic explanation for such behavior would illuminate the ranking of alternative preferences, and then, as reflected by choice, a maximization of such ranking. Put differently, by accepting a less remunerative offer, professional athletes may consciously substitute subjective value for objective value, and their choice simply reflects that which makes them most happy.
Though diagrammatic in many instances, preferences may not universally explain decision-making among professional athletes. Indeed, like all individuals, professional athletes appear vulnerable to cognitive biases, which are subconscious mental errors triggered by simplified informational processes, and heuristics, which are convenient, if unfinished predictive cues. Though cognitive biases and heuristics enable individuals to manage a complex array of stimuli, they often distort preferences and adversely affect decision-making. For instance, because of confirmation bias, individuals are subject to ignore or discount information that challenges existing beliefs. Alternatively, optimism bias leads individuals to assume that general risks do not apply with equal force to themselves.
In the context of professional sports, these and other cognitive distortions may impair not only the pursuit of objective value, but also rational assessment of subjective value. This is especially true when teams adroitly manipulate distortions, such as impressing illusory variances among themselves and other teams. Accordingly, when accepting a less remunerative offer, professional athletes may have unknowingly misinterpreted their preferences and rankings.
To date, no published analysis has addressed the potential influence of behavioral tendencies on professional athletes in contemplation of contract offers. Perhaps this is not surprising, given the relative paucity of professional athletes among the general population, their presumptively unique modes of employment, and a general aversion among academics for the study of sports. A more scrupulous assessment of professional athletes, however, suggests a uniquely desirable group for examination. Indeed, aside from their striking influence on the world and economy around them, professional athletes, unlike most groups commonly studied by academics, furnish published commentary of their thought processes, typically through newspaper, television, and radio interviews. Accordingly, professional athletes offer a wealth of narration as to their values, beliefs, and priorities, and, equally important, such narration occurs in real world settings, rather than in experimental circumstances. Along those lines, by evading the alleged experimental flaw of many behavioral law and economic studies, analysis of decision-making among professional athletes may prove extraordinarily salient in the broader discussion of behavioral sciences and their influence on traditional law and economics.
In pursuit of the above phenomena, this Article will begin by exploring the rational actor model, and how individuals utilize preferences in determining their optimal choice. This Article will then discuss limitations to the rational actor model, namely the role of cognitive biases and heuristics. Thereafter, this Article will canvass decision-making among professional athletes in contemplation of contract offers. In that regard, this Article will examine why some professional athletes pursue the most lucrative offer, while others do not, and to what extent cognitive biases and heuristics influence their decision-making. This Article will conclude by highlighting implications for professional sports and proposing recommendations for further analysis by economists, psychologists, and legal academics.
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