DeAngelis and Viscusi, ‘When to Walk Away and When to Risk It All’

While one might expect athletes to be strongly averse to extending their career too long when there is a chance of losing everything due to a concussion or a catastrophic injury, experimental subjects consistently played longer than the optimal amount for risk-neutral decisions. A commitment to the length of play in advance, as in the case of long-term contracts, led to a greater chance of staying beyond the expected payoff-maximizing point. If the decision frame is altered so that decisions are made in each period rather than through an upfront commitment, the magnitude of potential losses is more evident.

DeAngelis, Scott and Viscusi, W Kip, When to Walk Away and When to Risk It All (February 10, 2020). Vanderbilt Law Research Paper No 20-10.

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