Economic theories explained by Football – Part 1 – Behavioural Economics

In the first of a new series, I try to explain famous Economic theories by using football as the model.  Today, the work of Amos Tversky and Daniel Kahneman in defining Behavioural Economics.

Up until the 1980’s, standard economic theory was dominated by the idea of the “Rational Economic Man”, a theory first expounded by Adam Smith in his 1776 work, The Wealth of Nations.  He said that football clubs will charge as high a price as possible for admission, not caring whether fans can actually afford to come or not.  If fan A is priced out of the market, then he will be replaced by Fan B, with his half and half scarf on.  Fans make decisions of whether to attend based on costs and the benefits – i.e how much will it cost them and will the team win?  So essentially the two parties are at polar opposites.

However, Tversky and Kahneman realised that Football fans were basically irrational beings who would follow their side through thick and thin, spending ridiculous sums of money for any pieces of plastic crap with a logo on.  Countless marriages have been ruined over the last hundred years because football fans love their teams more than their partners.  That’s the theory of irrational thinking or Behavioural Economics.

14718955248_a8a53f7990_zThe two Maccabi Haifa fans saw that football fans behaviours and actions are unpredictable when the circumstances are uncertain.  Last season the crowds at The Dripping Pan dropped off towards the end of the season as we were on a poor run.  Fans faced a decision as to whether they would come and see us lose on a Tuesday night or stay at home and watch Holby City.  With the outcome predictable, fans acted rationally, deciding to stay at home in the warm, earning browny points from their partner and kidding themselves they are having a better evening, whilst secretly checking the action on Twitter every few minutes.

But give us the slight chance of a win and fans will travel to the middle of nowhere on a Tuesday night to support the team.  How many fans would we have got at East Thurrock United a few weeks ago if we hadn’t won the two previous games?

Tversky and Kahneman found that fans will travel to Leiston, in the middle of nowhere and involving a 5 mile trip to the nearest station because they have some decent pubs serving Adnams and we have a good record there but will shun a Monday night trip to Wealdstone for obvious reasons (apart from the fact we are often stuffed there).

In summary, football fans when faced with making a decision where the outcomes are uncertain do not think about the facts rationally in terms of “how much will it cost me to watch the away game at VCD Athletic”.  They think about the chance to visit a new ground, a few beers and the opportunity to give a goal keeper some friendly stick.  This, in summary, means that fans are not 100% rational.

And that, ladies and gentlemen, is the theory of Behavioural Economics.

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