TY  - JOUR
AU  - Massey,Cade
AU  - Thaler,Richard
TI  - Overconfidence vs. Market Efficiency in the National Football League
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11270
PY  - 2005
Y2  - April 2005
UR  - http://www.nber.org/papers/w11270
L1  - http://www.nber.org/papers/w11270.pdf
N1  - Author contact info:
Cade Massey
Wharton School of Business
University of Pennsylvania
3730 Walnut St. #554 
Philadelphia, PA 19104
       
Tel: 215-746-5884
E-Mail: cadem@wharton.upenn.edu

Richard H. Thaler
Booth School of Business
University of Chicago
5807 South Woodlawn Ave
Chicago, IL 60637
Tel: 773/702-5208
Fax: 773/834-9134
E-Mail: richard.thaler@chicagobooth.edu
AB  - A question of increasing interest to researchers in a variety of fields is whether the incentives and experience present in many "real world" settings mitigate judgment and decision-making biases. To investigate this question, we analyze the decision making of National Football League teams during their annual player draft. This is a domain in which incentives are exceedingly high and the opportunities for learning rich. It is also a domain in which multiple psychological factors suggest teams may overvalue the "right to choose" in the draft -- non-regressive predictions, overconfidence, the winner's curse and false consensus all suggest a bias in this direction. Using archival data on draft-day trades, player performance and compensation, we compare the market value of draft picks with the historical value of drafted players. We find that top draft picks are overvalued in a manner that is inconsistent with rational expectations and efficient markets and consistent with psychological research.
ER  -