Psychological Pressure in Competitive Environments: Evidence From a Randomized Natural Experiment

Authors: Jose Apesteguia and Ignacio Palacios-Huerta

American Economic Review, Vol. 100, No 4, 2548--2564, January, 2010

Emotions can have major e§ects on performance and socioeconomic outcomes. We study a natural experiment where two teams of professionals compete in a tournament taking turns in a sequence. As the sequential order is determined by the random outcome of a coin áip, the treatment and control groups are determined via explicit randomization. Hence, absent any psychological e§ects, both teams should have the same probability of winning. Yet, we Önd a systematic Örst-mover advantage. Further, professionals are self-aware of their own psychological e§ects and, when given the chance, they rationally react by systematically taking advantage of these e§ects. (JEL C93, D01, D03)

This paper originally appeared as Barcelona School of Economics Working Paper 361