Loss Aversion in the N.F.L.

Football coaches are known for being extraordinarily conservative when it comes to calling a risky play, since a single bad decision, or even a good decision that doesn’t work out, can get you fired. In the jargon of behavioral economics, coaches are “loss-averse”; this concept, pioneered by Amos Tversky and Daniel Kahneman, holds that we experience more pain with a loss of x than we experience pleasure with a gain of x. Who experiences loss aversion? Well, just about everyone: day traders; capuchin monkeys; and especially football coaches.

Which is why the last play of yesterday’s Chiefs-Raiders game was so interesting. With five seconds left, Chiefs coach Dick Vermeil had a tough decision to make. His team was trailing by 3 points with the ball inside the Raiders’ 1-yard line. If the Chiefs ran a play and didn’t score, they would likely not have time for another play and would lose. If they kicked the easy field goal, the game would go to overtime — and even though the Chiefs were playing at home, the Raiders had moved the ball easily late in the game and Vermeil, as he would later admit, was scared that the Raiders would win the coin toss in overtime and promptly score, winning the game without the Chiefs ever having a chance.

In retrospect, it wasn’t all that tough of a gamble. Choosing between a) a very significant gain if his team could accomplish the relatively simple act of moving the ball two feet; or b) a shadowy outcome that seemed as likely to end in loss as in victory, Vermeil did what most of us would probably do if we didn’t have several million people peeping over our shoulders, ready to criticize us: he went for the touchdown.

Vermeil sent in a running play, and Larry Johnson dived into the end zone, and the Chiefs won. The cover headline on today’s USA Today: “Chiefs’ Bold Gamble Hits Pay Dirt at Home: Kansas City shocks Oakland with touchdown after forgoing typing field goal on last play of game.”

The fact that Vermeil’s decision became the lead story is one good indicator how rare it is for coaches to take such a risk. Here is what he later told reporters: “Wow! I was scared. I just figured I’m too old to wait. [Vermeil recently turned 69.] “If we had not made it, then you guys would have had a lot of fun with that. It was not an impulsive thing. It was the right thing for us to do.”

Congratulations to Vermeil for making a good choice that turned out well. Here’s hoping a few of his colleagues will be envious enough of the attention he gets for making this wise gamble and follow suit.

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  1. I agree this seems like an example of someone resisting loss aversion and experiencing a good outcome. But when I analyze it from an expected utility perspective, it doesn’t quite look like loss aversion. Let 1=victory, -1=loss and 0=temporary tie. Going for the touchdown is a gamble with 40% chance of (1) and 60% chance of (-1). Going for the field goal is a two-stage gamble. Part 1 has 80% chance of 0 and 20% chance of –1. Part 2 has 30% chance of 1 and 70% chance of –1. So FG=24% chance of victory and TD=40% chance of victory.

    So the EU of going for the TD is greater than the EU of going for the FG. I guess where the loss aversion comes in is that in the VERY short run (the first play) if you go for the TD, your risk of losing is greater. Most demonstrations of loss aversion don’t have this temporal component. But I agree that loss aversion would lead a coach to choose the option that has the lowest p(loss) on the very next play.

    My favorite example of someone resisting loss aversion and experiencing a positive outcome is the story of Aron Ralston, the hiker trapped under a boulder who was willing to accept a sure loss (amputating his arm) in order to minimize the risk of a greater loss (death). He was not “risk seeking for losses.” This is very unusual (like the coach) and probably saved his life.

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  2. I agree this seems like an example of someone resisting loss aversion and experiencing a good outcome. But when I analyze it from an expected utility perspective, it doesn’t quite look like loss aversion. Let 1=victory, -1=loss and 0=temporary tie. Going for the touchdown is a gamble with 40% chance of (1) and 60% chance of (-1). Going for the field goal is a two-stage gamble. Part 1 has 80% chance of 0 and 20% chance of -1. Part 2 has 30% chance of 1 and 70% chance of -1. So FG=24% chance of victory and TD=40% chance of victory.

    So the EU of going for the TD is greater than the EU of going for the FG. I guess where the loss aversion comes in is that in the VERY short run (the first play) if you go for the TD, your risk of losing is greater. Most demonstrations of loss aversion don’t have this temporal component. But I agree that loss aversion would lead a coach to choose the option that has the lowest p(loss) on the very next play.

    My favorite example of someone resisting loss aversion and experiencing a positive outcome is the story of Aron Ralston, the hiker trapped under a boulder who was willing to accept a sure loss (amputating his arm) in order to minimize the risk of a greater loss (death). He was not “risk seeking for losses.” This is very unusual (like the coach) and probably saved his life.

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  3. bp32 says:

    nfo,

    Yup, sorry if I wasn’t clear but yes, I was essentially arguing (following K&T) that Vermeil’s reference point may have been the recovery of a loss and not the prospect of a gain…

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  4. bp32 says:

    nfo,

    Yup, sorry if I wasn’t clear but yes, I was essentially arguing (following K&T) that Vermeil’s reference point may have been the recovery of a loss and not the prospect of a gain…

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  5. trieu says:

    Unfortunately, it appears that the sports media is equally loss-averse as NFL coaches. It has characterized Vermeil’s decision as a “big gamble,” when it is not. Kicking a field goal and going to overtime — where your chances of a win are basically 50/50 — is really a bigger gamble than trying to go one yard for the win. This perpetuates loss aversion.

    So while Vermeil struck a blow for modernity, the media’s characterization of his decision has disappointed.

    ps. The Tuesday Morning Quarterback (aka, Gregg Easterbrook, Brookings fellow) has been lamenting the loss aversion of NFL coaches for many years. He is now writing (as TMQ) for NFL.com.

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  6. trieu says:

    Unfortunately, it appears that the sports media is equally loss-averse as NFL coaches. It has characterized Vermeil’s decision as a “big gamble,” when it is not. Kicking a field goal and going to overtime — where your chances of a win are basically 50/50 — is really a bigger gamble than trying to go one yard for the win. This perpetuates loss aversion.

    So while Vermeil struck a blow for modernity, the media’s characterization of his decision has disappointed.

    ps. The Tuesday Morning Quarterback (aka, Gregg Easterbrook, Brookings fellow) has been lamenting the loss aversion of NFL coaches for many years. He is now writing (as TMQ) for NFL.com.

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  7. Ken D. says:

    Devotees of both football and freakonmics might enjoy John T. Reed’s Football Time Management; http://www.store.yahoo.com/johntreedcom-store/footclocman2.html.
    He doesn’t make it easy to get, but libraries or used book services should have it. He analyzes clock management and related subjects with a high degree of logical clarity. For example, there is reason to believe that he is responsible for the trend in recent years for a trailing team to call time outs on defense with substantial time left, rather than hoarding them until they get the ball.

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  8. Ken D. says:

    Devotees of both football and freakonmics might enjoy John T. Reed’s Football Time Management; http://www.store.yahoo.com/johntreedcom-store/footclocman2.html.
    He doesn’t make it easy to get, but libraries or used book services should have it. He analyzes clock management and related subjects with a high degree of logical clarity. For example, there is reason to believe that he is responsible for the trend in recent years for a trailing team to call time outs on defense with substantial time left, rather than hoarding them until they get the ball.

    Thumb up 0 Thumb down 0