Risk-taking dynamics in tournaments: Evidence from professional golf

Abstract

• We analyze golfers’ risk-taking strategies using ten years of data from the PGA. • Golfers become more likely to adopt risky strategies as the value of risk-taking rises. • Golfers’ risk levels are discontinuous for those around the cut. • Golfers’ willingness to take risks changes with the presence superstars. • We find evidence that both stratigic decisions, as well as effort, matter in the superstar effect (Brown 2011). We use a unique dataset comprised of observations from ten years of professional golf tournaments to analyze golfers’ risk-taking strategies. We focus on analyzing the decisions golfers made when hitting their second shots on par five holes, a shot that often forces golfers to play daringly or conservatively, with little in between. Successful gambles often lead to profitable outcomes when executed well but leave golfers open to tail-end risks for poorly struck shots. Our analysis yields three interesting findings, all of which are closely related to previous studies of strategic risk. First, the strategies golfers adopt hew closely to the way economic agents in other settings cope with uncertainty. Second, golfers’ decisions are dynamic throughout tournaments, especially when playing relatively well early in a tournament and near the halfway mark of a tournament when the worst-performing half of the field is cut. We use regression discontinuity tools to show meaningful differences between the decisions made by golfers on either side of the cut score. Last, we argue golfers’ willingness to take risks was affected by Superstar Tiger Woods, a finding that suggests a strategic component of the Superstar Effect needs to be considered alongside the effort component, as discussed in Brown (2011).