Wednesday, March 18, 2009

The Advantages of Falling Slightly Behind

An interesting study from a couple of Wharton professors looks at how the halftime score at basketball games predicts the ultimate winner of the game. As expected, teams trailing at halftime generally lower probabilities of winning the game. So, what makes the study interesting? The authors found that teams trailing by one point at halftime had a higher win probability than those leading by a point at half time. Two explanations could account for this - either slightly trailing teams pick up second half performance or slightly leading teams slack off.

Using some lab experiments, the authors found that individuals performing a task who were told they were slightly trailing tend to increase performance; the leaders showed no slacking off. Prospect theory, with its observation that people feel losses more than gains, can provide one explanation for why the trailers worked harder.

It appears that this phenomenon applies to individuals and teams. Does it apply to companies as well? If so, we would expect that companies slightly trailing their competitors to step up their performance.

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