IDEAS home Printed from https://ideas.repec.org/a/eee/eecrev/v87y2016icp304-333.html
   My bibliography  Save this article

Media attention and betting markets

Author

Listed:
  • Legge, Stefan
  • Schmid, Lukas

Abstract

This paper investigates whether biased media attention affects perceptions about future events. We use data on World Cup tournaments in alpine skiing for the period of 1992–2014 and exploit close races as a source of randomness for ranking positions. Since the allocation of media attention is skewed towards the winner and athletes on the podium, we can estimate the causal effect of media attention. Our results document that ranking schemes generate sharp discontinuities in media attention even in close competitions. However, both regression discontinuity and instrumental variables estimates reveal that biased media attention neither affects prices nor quantities in the betting market. We conduct a series of robustness tests to explore the sensitivity of our results.

Suggested Citation

  • Legge, Stefan & Schmid, Lukas, 2016. "Media attention and betting markets," European Economic Review, Elsevier, vol. 87(C), pages 304-333.
    • Handle: RePEc:eee:eecrev:v:87:y:2016:i:c:p:304-333
    DOI: 10.1016/j.euroecorev.2016.06.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014292116301052
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.euroecorev.2016.06.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Colin F. Camerer, 1998. "Can Asset Markets Be Manipulated? A Field Experiment with Racetrack Betting," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 457-482, June.
    2. Joshua D. Angrist & Alan B. Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 69-85, Fall.
    3. Falkinger, Josef, 2007. "Attention economies," Journal of Economic Theory, Elsevier, vol. 133(1), pages 266-294, March.
    4. Brett Green & Jeffrey Zwiebel, 2018. "The Hot-Hand Fallacy: Cognitive Mistakes or Equilibrium Adjustments? Evidence from Major League Baseball," Management Science, INFORMS, vol. 64(11), pages 5315-5348, November.
    5. Constantine E. Frangakis & Donald B. Rubin, 2002. "Principal Stratification in Causal Inference," Biometrics, The International Biometric Society, vol. 58(1), pages 21-29, March.
    6. Joshua B. Miller & Adam Sanjurjo, 2015. "Surprised by the Gambler’s and Hot Hand Fallacies? A Truth in the Law of Small Numbers," Working Papers 552, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    7. Erik Snowberg & Justin Wolfers, 2010. "Explaining the Favorite-Long Shot Bias: Is it Risk-Love or Misperceptions?," Journal of Political Economy, University of Chicago Press, vol. 118(4), pages 723-746, August.
    8. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
    9. Christos Genakos & Mario Pagliero, 2012. "Interim Rank, Risk Taking, and Performance in Dynamic Tournaments," Journal of Political Economy, University of Chicago Press, vol. 120(4), pages 782-813.
    10. David Gill & Zdenka Kissová & Jaesun Lee & Victoria Prowse, 2019. "First-Place Loving and Last-Place Loathing: How Rank in the Distribution of Performance Affects Effort Provision," Management Science, INFORMS, vol. 65(2), pages 494-507, February.
    11. David Card & Alexandre Mas & Enrico Moretti & Emmanuel Saez, 2012. "Inequality at Work: The Effect of Peer Salaries on Job Satisfaction," American Economic Review, American Economic Association, vol. 102(6), pages 2981-3003, October.
    12. Thaler, Richard H, 1988. "Anomalies: The Winner's Curse," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 191-202, Winter.
    13. Stefano DellaVigna & Ethan Kaplan, 2007. "The Fox News Effect: Media Bias and Voting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(3), pages 1187-1234.
    14. Dawes, Robyn M & Thaler, Richard H, 1988. "Anomalies: Cooperation," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 187-197, Summer.
    15. Robert Jensen & Emily Oster, 2009. "The Power of TV: Cable Television and Women's Status in India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(3), pages 1057-1094.
    16. Eliana La Ferrara & Alberto Chong & Suzanne Duryea, 2012. "Soap Operas and Fertility: Evidence from Brazil," American Economic Journal: Applied Economics, American Economic Association, vol. 4(4), pages 1-31, October.
    17. Leonardo Bursztyn & Davide Cantoni, 2016. "Tear in the Iron Curtain: The Impact of Western Television on Consumption Behavior," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 25-41, March.
    18. Tran, Anh & Zeckhauser, Richard, 2012. "Rank as an inherent incentive: Evidence from a field experiment," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 645-650.
    19. Thomas Eisensee & David Strömberg, 2007. "News Droughts, News Floods, and U. S. Disaster Relief," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 693-728.
    20. Reto Foellmi & Stefan Legge & Lukas Schmid, 2016. "Do Professionals Get It Right? Limited Attention and Risk‐taking Behaviour," Economic Journal, Royal Economic Society, vol. 0(592), pages 724-755, May.
    21. Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-372, June.
    22. Connolly, Robert A. & Rendleman, Richard J., 2008. "Skill, Luck, and Streaky Play on the PGA Tour," Journal of the American Statistical Association, American Statistical Association, vol. 103, pages 74-88, March.
    23. Strömberg, David, 2015. "Media Coverage and Political Accountability: Theory and Evidence," CEPR Discussion Papers 10638, C.E.P.R. Discussion Papers.
    24. Justin Wolfers & Eric Zitzewitz, 2006. "Prediction Markets in Theory and Practice," NBER Working Papers 12083, National Bureau of Economic Research, Inc.
    25. Frölich, Markus, 2007. "Regression Discontinuity Design with Covariates," IZA Discussion Papers 3024, Institute of Labor Economics (IZA).
    26. Hanson, Robin & Oprea, Ryan & Porter, David, 2006. "Information aggregation and manipulation in an experimental market," Journal of Economic Behavior & Organization, Elsevier, vol. 60(4), pages 449-459, August.
    27. Kyle C. Meng, 2017. "Using a Free Permit Rule to Forecast the Marginal Abatement Cost of Proposed Climate Policy," American Economic Review, American Economic Association, vol. 107(3), pages 748-784, March.
    28. Camelia M. Kuhnen & Agnieszka Tymula, 2012. "Feedback, Self-Esteem, and Performance in Organizations," Management Science, INFORMS, vol. 58(1), pages 94-113, January.
    29. RYan Oprea & David Porter & Chris Hibbert & Robin Hanson & Dorina Tila, 2008. "Can Manipulators Mislead Prediction Market Observers?," Working Papers 08-01, Chapman University, Economic Science Institute.
    30. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    31. repec:fth:prinin:455 is not listed on IDEAS
    32. Andrew Gelman & Guido Imbens, 2019. "Why High-Order Polynomials Should Not Be Used in Regression Discontinuity Designs," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 37(3), pages 447-456, July.
    33. Klaassen, Franc J.G.M. & Magnus, Jan R., 2009. "The efficiency of top agents: An analysis through service strategy in tennis," Journal of Econometrics, Elsevier, vol. 148(1), pages 72-85, January.
    34. La Ferrara, Eliana & DellaVigna, Stefano, 2015. "Economic and Social Impacts of the Media," CEPR Discussion Papers 10667, C.E.P.R. Discussion Papers.
    35. Hamlen, William A, Jr, 1991. "Superstardom in Popular Music: Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 729-733, November.
    36. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, vol. 142(2), pages 698-714, February.
    37. Nicola Mastrorocco & Luigi Minale, 2016. "Information and Crime Perceptions: Evidence from a Natural Experiment," RF Berlin - CReAM Discussion Paper Series 1601, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    38. Daniel Feenberg & Ina Ganguli & Patrick Gaulé & Jonathan Gruber, 2017. "It’s Good to Be First: Order Bias in Reading and Citing NBER Working Papers," The Review of Economics and Statistics, MIT Press, vol. 99(1), pages 32-39, March.
    39. Cragg, John G. & Donald, Stephen G., 1993. "Testing Identifiability and Specification in Instrumental Variable Models," Econometric Theory, Cambridge University Press, vol. 9(2), pages 222-240, April.
    40. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-209, January.
    41. Josef Falkinger, 2008. "Limited Attention as a Scarce Resource in Information-Rich Economies," Economic Journal, Royal Economic Society, vol. 118(532), pages 1596-1620, October.
    42. Matthew Gentzkow & Jesse M. Shapiro, 2010. "What Drives Media Slant? Evidence From U.S. Daily Newspapers," Econometrica, Econometric Society, vol. 78(1), pages 35-71, January.
    43. Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, vol. 56(4), pages 279-279.
    44. Joshua Angrist & Alan Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Working Papers 834, Princeton University, Department of Economics, Industrial Relations Section..
    45. Erik Hoelzl & Aldo Rustichini, 2005. "Overconfident: Do You Put Your Money On It?," Economic Journal, Royal Economic Society, vol. 115(503), pages 305-318, April.
    46. Steven D. Levitt, 2004. "Why are gambling markets organised so differently from financial markets?," Economic Journal, Royal Economic Society, vol. 114(495), pages 223-246, April.
    47. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-858, December.
    48. Paul W. Rhode & Koleman S. Strumpf, 2004. "Historical Presidential Betting Markets," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 127-141, Spring.
    49. Colin Camerer, 1998. "Can asset markets be manipulated? A field experiment with racetrack betting," Natural Field Experiments 00222, The Field Experiments Website.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David Gill & Zdenka Kissová & Jaesun Lee & Victoria Prowse, 2019. "First-Place Loving and Last-Place Loathing: How Rank in the Distribution of Performance Affects Effort Provision," Management Science, INFORMS, vol. 65(2), pages 494-507, February.
    2. Marius Ötting & Christian Deutscher & Carl Singleton & Luca De Angelis, 2023. "Gambling on Momentum in Contests," Economics Discussion Papers em-dp2023-08, Department of Economics, University of Reading.
    3. Raja Kali & David Pastoriza & Jean‐François Plante, 2018. "The burden of glory: Competing for nonmonetary incentives in rank‐order tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(1), pages 102-118, March.
    4. Vojtech Kotrba, 2023. "Testing “hot hand” hypothesis at the individual athletes' level in soccer," Economics Bulletin, AccessEcon, vol. 43(3), pages 1356-1365.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Legge, Stefan & Schmid, Lukas, 2013. "Rankings, Random Successes, and Individual Performance," Economics Working Paper Series 1340, University of St. Gallen, School of Economics and Political Science.
    2. Snowberg, Erik & Wolfers, Justin & Zitzewitz, Eric, 2013. "Prediction Markets for Economic Forecasting," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 657-687, Elsevier.
    3. Couttenier, Mathieu & Hatte, Sophie, 2016. "Mass media effects on non-governmental organizations," Journal of Development Economics, Elsevier, vol. 123(C), pages 57-72.
    4. Kyle C. Meng, 2017. "Using a Free Permit Rule to Forecast the Marginal Abatement Cost of Proposed Climate Policy," American Economic Review, American Economic Association, vol. 107(3), pages 748-784, March.
    5. Ruben Enikolopov & Maria Petrova & Ekaterina Zhuravskaya, 2011. "Media and Political Persuasion: Evidence from Russia," American Economic Review, American Economic Association, vol. 101(7), pages 3253-3285, December.
    6. Mauricio Villamizar‐Villegas & Freddy A. Pinzon‐Puerto & Maria Alejandra Ruiz‐Sanchez, 2022. "A comprehensive history of regression discontinuity designs: An empirical survey of the last 60 years," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 1130-1178, September.
    7. Friehe, Tim & Müller, Helge & Neumeier, Florian, 2018. "The effect of Western TV on crime: Evidence from East Germany," European Journal of Political Economy, Elsevier, vol. 55(C), pages 346-372.
    8. Francesco Sobbrio, 2014. "The political economy of news media: theory, evidence and open issues," Chapters, in: Francesco Forte & Ram Mudambi & Pietro Maria Navarra (ed.), A Handbook of Alternative Theories of Public Economics, chapter 13, pages 278-320, Edward Elgar Publishing.
    9. Cuong Viet Nguyen & Finn Tarp, 2023. "Cash Transfers and Labor Supply: New Evidence on Impacts and Mechanisms," DERG working paper series 23-18, University of Copenhagen. Department of Economics. Development Economics Research Group (DERG).
    10. Chadi, Adrian & Hoffmann, Manuel, 2021. "Television, Health, and Happiness: A Natural Experiment in West Germany," IZA Discussion Papers 14721, Institute of Labor Economics (IZA).
    11. Bruce, Raphael & Lima, Rafael Costa, 2019. "Compulsory voting and TV news consumption," Journal of Development Economics, Elsevier, vol. 138(C), pages 165-179.
    12. Mayank Aggarwal & Anindya S. Chakrabarti & Chirantan Chatterjee, 2023. "Movies, stigma and choice: Evidence from the pharmaceutical industry," Health Economics, John Wiley & Sons, Ltd., vol. 32(5), pages 1019-1039, May.
    13. Steffen Andersen & Cristian Badarinza & Lu Liu & Julie Marx & Tarun Ramadorai, 2022. "Reference Dependence in the Housing Market," American Economic Review, American Economic Association, vol. 112(10), pages 3398-3440, October.
    14. David Card & Gordon B. Dahl, 2011. "Family Violence and Football: The Effect of Unexpected Emotional Cues on Violent Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(1), pages 103-143.
    15. Ruben Durante & Paolo Pinotti & Andrea Tesei, 2013. "Voting Alone? The Political and Cultural Consequences of Commercial TV," SciencePo Working papers hal-03460816, HAL.
    16. Ruben Durante & Paolo Pinotti & Andrea Tesei, 2019. "The Political Legacy of Entertainment TV," American Economic Review, American Economic Association, vol. 109(7), pages 2497-2530, July.
    17. Erik Snowberg & Justin Wolfers, 2010. "Explaining the Favorite-Long Shot Bias: Is it Risk-Love or Misperceptions?," Journal of Political Economy, University of Chicago Press, vol. 118(4), pages 723-746, August.
    18. Galanis, S. & Ioannou, C. & Kotronis, S., 2019. "Information Aggregation Under Ambiguity: Theory and Experimental Evidence," Working Papers 20/05, Department of Economics, City University London.
    19. Wolfers, Justin & Zitzewitz, Eric, 2006. "Prediction Markets in Theory and Practice," CEPR Discussion Papers 5578, C.E.P.R. Discussion Papers.
    20. Principe, Francesco & Carrieri, Vincenzo, 2020. "Health's kitchen: TV, edutainment and nutrition," Ruhr Economic Papers 883, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

    More about this item

    Keywords

    Betting; Media attention; Rankings;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:87:y:2016:i:c:p:304-333. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eer .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.