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Investigation of Sunk Cost Fallacy in European Football – Empirical Evidence from English Premier League and German Bundesliga

Year 2022, , 22 - 35, 28.04.2022
https://doi.org/10.54141/psbd.1067276

Abstract

Sunk cost fallacy is a behavioral decision-making concept that leads to biased decisions and sub-optimal outcomes. Although academics have shown some interest in this phenomenon, only a few studies investigate the presence of sunk cost fallacy in European football. This study investigates whether the sunk cost fallacy exists in Europe’s top two football leagues using transfer fees and playing time. The presence of sunk cost fallacy would indicate a faulty decision-making process. The conducted regression continuity design results suggest that the coaches in the English Premier League make biased decisions due to sunk cost fallacy, whereas the coaches in German Bundesliga do not. The biased decisions of Premier League managers indicate managerial inefficiency, which might lead to undesired outcomes.

References

  • Anderson, E. & Sullivan, M. (1993). The Antecedents and Consequences of Customer Satisfaction for Firms. Marketing Science, 125-212. https://doi.org/10.1287/mksc.12.2.125
  • Arkes, H. (1996). The Psychology of Waste. Journal of Behavioral Decision Making, 213-224. https://doi.org/10.1002/(SICI)1099-0771(199609)9:3<213::AID-BDM230>3.0.CO;2-1
  • Bazerman, M., Beekun, R., & Schoorman, D. (1982). Performance evaluation in a dynamic context: A laboratory study of the impact of a prior commitment to the rate. Journal of Applied Psychology, 873-876.
  • Calonico, S., Cattaneo, M., & Rocio, T. (2014). Robust data-driven inference in the regression-discontinuity design. The Stata Journal, 909-946.
  • Camarer, C., & Weber, R. (1999). The econometrics and behavioral economics of escalation of commitment: a re-examination of Staw and Hoang’s NBA data. Journal of Economic Behavior and Organization, 59-82. https://doi.org/10.1016/S0167-2681(99)00026-8
  • Dailymail. (2017, May). The price of trying to bring glory days back to Manchester United: £367,640 a week for Zlatan Ibrahimovic... and a £3.5million loyalty bonus for Paul Pogba. Retrieved from Dailymail: https://www.dailymail.co.uk/sport/football/article-4485750/Cost-Man-Utd-signing-Ibrahimovic-Pogba-revealed.html
  • Dawson, P., Dobson, S., & Gerrard, B. (2000). Estimating Coaching Efficiency in Professional Team Sports: Evidence from English Association Football. Scottish Journal of Political Economy, 399-421.
  • Frick, B., & Simmons, R. (2008). The impact of managerial quality on organizational performance: evidence from German soccer. Managerial and Decision Economics, 593-600. https://doi.org/10.1002/mde.1431
  • Garland, H. (1990). Throwing Good Money After Bad: The Effect of Sunk Costs on the Decision to Escalate Commitment to an Ongoing Project. Journal of Applied Psychology, 728-731. https://doi.org/10.1037/0021-9010.75.6.728
  • Garland, H., & Newport, S. (1991). Effects of Absolute and Relative Sunk Costs on the Decision to Persist with a Course of Action. Organizational Behavior and Human Decision Processes, 55-69. https://doi.org/10.1016/0749-5978(91)90005-E
  • Hackinger, J. (2019). Ignoring millions of Euros: Transfer fees and sunk cost fallacy in professional football. Journal of Economic Psychology, 1-53. https://doi.org/10.1016/j.joep.2018.10.006
  • Keefer, Q. (2015a). Performance Feedback Does Not Eliminate the Sunk-Cost Fallacy: Evidence From Professional Football. Journal of Labor Research, 409-426.
  • Keefer, Q. (2015b). The Sunk-Cost Fallacy in the National Football League: Salary Cap Value and Playing Time. Journal of Sports Economics, 1-16. https://doi.org/10.1177/1527002515574515
  • Kern, M., & Süssmuth, B. (2005). Managerial Efficiency in German Top League Soccer: An Econometric Analysis of Club Performances On and Off the Pitch. German Economic Review, 485-506. https://doi.org/10.1111/j.1468-0475.2005.00143.x
  • Leeds, D., Leeds, M., & Motomura, A. (2015). Are Sunk Costs Irrelevant? Evidence from Playing Time in the National Basketball Association. Economic Inquiry, 1305-1316. http://dx.doi.org/10.1111/ecin.12190
  • Oliva, T., Oliver, R., & Bearden, W. (1995). The relationship among customers satisfaction, involvement, and product performance: A catastrophe theory application. Journal of the Society for General Systems Research, 104-132. https://doi.org/10.1002/bs.3830400203
  • Radoman, M. (2015). Labor Market Implications of Institutional Changes in European Football: The Bosman Ruling and Its Effect on Productivity and Career Duration of Players. Journal of Sports Economics, 1-22. https://doi.org/10.1177/1527002515594555
  • Scully, G. (1994). Managerial Efficiency and Survivability in Professional Team Sport. Managerial and Decision Economics, 403-411.
  • Sebastian, C., Cattaneo, M., & Titiunik, R. (2013). Robust data-driven inference in the regression-discontinuity design. The Stata Journal, 14(4), 909-946.
  • Shubik, M. (1971). The Dollar Auction game: a paradox in noncooperative behavior and escalation. Journal of Conflict Resolution, 109-112. https://doi.org/10.1177/002200277101500111
  • Staw, B. (1976). Knee-deep in the big muddy: a study of escalating commitment to a chosen course of action. Organizational Behavior and Human Performance, 27-44. https://doi.org/10.1016/0030-5073(76)90005-2
  • Staw, B., & Hoang, H. (1995). Sunk Costs in the NBA: Why Draft Order Affects Playing Time and Survival in Professional Basketball. Administrative Science Quarterly, 474-494.
  • Teger, A. (1980). Too Much Invested to Quit. New York: Pergamon.
  • Thaler, R. (1980). Toward a positive theory of consumer choice. Journal of Economic Behavior and Organization, 39-60. https://doi.org/10.1016/0167-2681(80)90051-7
  • Thistlethwaite, D., & Campbell, D. (1960). Regression-discontinuity analysis: An alternative to the ex post facto experiment. Journal of Educational Psychology, 51(6), 309-317.
  • Transfermarkt. (2018, June). Transfermarkt. Retrieved from Transfermarkt: https://www.transfermarkt.com/transfers/transfersalden/statistik/plus/1?sa=&saison_id=2013&saison_id_bis=2017&land_id=&nat=&pos=&w_s=
  • WhoScored. (2018, June). WhoScored. Retrieved from Transfermarkt: https://www.whoscored.com/Regions/81/Tournaments/3/Germany-Bundesliga
Year 2022, , 22 - 35, 28.04.2022
https://doi.org/10.54141/psbd.1067276

Abstract

References

  • Anderson, E. & Sullivan, M. (1993). The Antecedents and Consequences of Customer Satisfaction for Firms. Marketing Science, 125-212. https://doi.org/10.1287/mksc.12.2.125
  • Arkes, H. (1996). The Psychology of Waste. Journal of Behavioral Decision Making, 213-224. https://doi.org/10.1002/(SICI)1099-0771(199609)9:3<213::AID-BDM230>3.0.CO;2-1
  • Bazerman, M., Beekun, R., & Schoorman, D. (1982). Performance evaluation in a dynamic context: A laboratory study of the impact of a prior commitment to the rate. Journal of Applied Psychology, 873-876.
  • Calonico, S., Cattaneo, M., & Rocio, T. (2014). Robust data-driven inference in the regression-discontinuity design. The Stata Journal, 909-946.
  • Camarer, C., & Weber, R. (1999). The econometrics and behavioral economics of escalation of commitment: a re-examination of Staw and Hoang’s NBA data. Journal of Economic Behavior and Organization, 59-82. https://doi.org/10.1016/S0167-2681(99)00026-8
  • Dailymail. (2017, May). The price of trying to bring glory days back to Manchester United: £367,640 a week for Zlatan Ibrahimovic... and a £3.5million loyalty bonus for Paul Pogba. Retrieved from Dailymail: https://www.dailymail.co.uk/sport/football/article-4485750/Cost-Man-Utd-signing-Ibrahimovic-Pogba-revealed.html
  • Dawson, P., Dobson, S., & Gerrard, B. (2000). Estimating Coaching Efficiency in Professional Team Sports: Evidence from English Association Football. Scottish Journal of Political Economy, 399-421.
  • Frick, B., & Simmons, R. (2008). The impact of managerial quality on organizational performance: evidence from German soccer. Managerial and Decision Economics, 593-600. https://doi.org/10.1002/mde.1431
  • Garland, H. (1990). Throwing Good Money After Bad: The Effect of Sunk Costs on the Decision to Escalate Commitment to an Ongoing Project. Journal of Applied Psychology, 728-731. https://doi.org/10.1037/0021-9010.75.6.728
  • Garland, H., & Newport, S. (1991). Effects of Absolute and Relative Sunk Costs on the Decision to Persist with a Course of Action. Organizational Behavior and Human Decision Processes, 55-69. https://doi.org/10.1016/0749-5978(91)90005-E
  • Hackinger, J. (2019). Ignoring millions of Euros: Transfer fees and sunk cost fallacy in professional football. Journal of Economic Psychology, 1-53. https://doi.org/10.1016/j.joep.2018.10.006
  • Keefer, Q. (2015a). Performance Feedback Does Not Eliminate the Sunk-Cost Fallacy: Evidence From Professional Football. Journal of Labor Research, 409-426.
  • Keefer, Q. (2015b). The Sunk-Cost Fallacy in the National Football League: Salary Cap Value and Playing Time. Journal of Sports Economics, 1-16. https://doi.org/10.1177/1527002515574515
  • Kern, M., & Süssmuth, B. (2005). Managerial Efficiency in German Top League Soccer: An Econometric Analysis of Club Performances On and Off the Pitch. German Economic Review, 485-506. https://doi.org/10.1111/j.1468-0475.2005.00143.x
  • Leeds, D., Leeds, M., & Motomura, A. (2015). Are Sunk Costs Irrelevant? Evidence from Playing Time in the National Basketball Association. Economic Inquiry, 1305-1316. http://dx.doi.org/10.1111/ecin.12190
  • Oliva, T., Oliver, R., & Bearden, W. (1995). The relationship among customers satisfaction, involvement, and product performance: A catastrophe theory application. Journal of the Society for General Systems Research, 104-132. https://doi.org/10.1002/bs.3830400203
  • Radoman, M. (2015). Labor Market Implications of Institutional Changes in European Football: The Bosman Ruling and Its Effect on Productivity and Career Duration of Players. Journal of Sports Economics, 1-22. https://doi.org/10.1177/1527002515594555
  • Scully, G. (1994). Managerial Efficiency and Survivability in Professional Team Sport. Managerial and Decision Economics, 403-411.
  • Sebastian, C., Cattaneo, M., & Titiunik, R. (2013). Robust data-driven inference in the regression-discontinuity design. The Stata Journal, 14(4), 909-946.
  • Shubik, M. (1971). The Dollar Auction game: a paradox in noncooperative behavior and escalation. Journal of Conflict Resolution, 109-112. https://doi.org/10.1177/002200277101500111
  • Staw, B. (1976). Knee-deep in the big muddy: a study of escalating commitment to a chosen course of action. Organizational Behavior and Human Performance, 27-44. https://doi.org/10.1016/0030-5073(76)90005-2
  • Staw, B., & Hoang, H. (1995). Sunk Costs in the NBA: Why Draft Order Affects Playing Time and Survival in Professional Basketball. Administrative Science Quarterly, 474-494.
  • Teger, A. (1980). Too Much Invested to Quit. New York: Pergamon.
  • Thaler, R. (1980). Toward a positive theory of consumer choice. Journal of Economic Behavior and Organization, 39-60. https://doi.org/10.1016/0167-2681(80)90051-7
  • Thistlethwaite, D., & Campbell, D. (1960). Regression-discontinuity analysis: An alternative to the ex post facto experiment. Journal of Educational Psychology, 51(6), 309-317.
  • Transfermarkt. (2018, June). Transfermarkt. Retrieved from Transfermarkt: https://www.transfermarkt.com/transfers/transfersalden/statistik/plus/1?sa=&saison_id=2013&saison_id_bis=2017&land_id=&nat=&pos=&w_s=
  • WhoScored. (2018, June). WhoScored. Retrieved from Transfermarkt: https://www.whoscored.com/Regions/81/Tournaments/3/Germany-Bundesliga
There are 27 citations in total.

Details

Primary Language English
Subjects Sports Medicine
Journal Section Leisure & Sport Management
Authors

Selçuk Özaydın 0000-0003-3935-8790

Publication Date April 28, 2022
Published in Issue Year 2022

Cite

APA Özaydın, S. (2022). Investigation of Sunk Cost Fallacy in European Football – Empirical Evidence from English Premier League and German Bundesliga. Pamukkale Journal of Sport Sciences, 13(1), 22-35. https://doi.org/10.54141/psbd.1067276