By Daniel Adler
This article also appears on the Huffington Post.
In last week’s New York Times, economist Richard Thaler discussed Swoopo.com, a so-called “entertainment shopping” site. The premise is relatively simple and somewhat diabolical. Unlike normal auctions sites such as eBay—which operates as a modified second price auction—Swoopo.com bidders pay to place each bid in addition to the final selling price. Though the items sell for far less than retail price, the aggregate of money spent on bids is huge. Some auctions go in 1 cent increments, so the site rakes in 61 times the final sale price (60 cents for each cent the bid goes up and the actual price).
So what does this have to do with sports? Yes, Richard Thaler wrote my favorite sports economics paper, but there is an even greater connection to the world of sports…
In the article, Thaler talks about the psychological principle of commitment, one of Robert Cialdini’s weapons of influence. Basically, once we start playing, we hate to lose.
While reading the article, I suddenly realized that little separates me as a sports fan from the Swoopo.com bidder who just spent $1000 on a $200 camera. As a fan of the Cleveland teams, I am a prime example of a person with a commitment problem—too much commitment. With each game I went to as a child, each hat I bought, each bag of peanuts I devoured, I was pulling myself deeper and deeper into the spiral of commitment. Now, I am stuck rooting for teams that have not won a championship since 1964.
This phenomenon does not just present itself in the world of sports fandom. Sports teams fall prey to the commitment principle. Frequently, they fail to understand the idea of sunk costs. Once they have committed, they are reluctant to drop a player. Take the Houston Texans, who were faced with a decision about quarterback David Carr after his fourth season. The team had already sunk a first overall pick and $21.75 million into the former Fresno State star and it was clear he was not a very good player. To retain Carr’s services for three more seasons, his contract called for an $8 million option bonus (in addition to his salary during those seasons). If they did not pay the option bonus, they would have to release Carr or try to get him to renegotiate his deal. Already deeply invested in Carr, the Texans exercised the option and ended up spending $13.25 million to keep David Carr around for a fifth season. They dropped him the next year.
If I was starting over, I would probably choose to root for more successful teams, but this is the hand my hometown has dealt me. Will it be that much sweeter if/when a Cleveland team finally wins? I can only commit to hoping that is true.