Reference-Dependent Preferences Under High Stakes and Experience: Evidence from the Australian Open

Abstract

I study tennis players’ risk-taking behaviour during the 2016 Australian Open. Using spatial features from a proprietary dataset, I estimate a measure of player aggressiveness and find that players shift their risk-taking preferences depending on whether they are behind or ahead in the game-score. These findings are consistent with the axiom of reference- dependent preferences put forward by Prospect Theory. I also show that, other things equal, the probability of winning a point is increasing on shot aggressiveness. Considering the fact that aggressiveness changes with the game-score, this result suggests players could be performing sub-optimally under specific game situations. I therefore provide evidence of reference-dependent preferences and a potential behavioural bias in a context of high competition and experience.

Keywords: prospect theory, loss aversion, risk-taking, tennis

JEL Classification: D03, D81, Z20