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

• Authors: Ignacio Palacios-Huerta and Jose Apesteguia.
• American Economic Review

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)