Euro2020 has reached the knock-out stage. Millions of fans in Europe and around the world will experience joy and, more likely, pain as some teams advance and more get eliminated. In fact, according to researchers at the University of Sussex "the pain felt by football fans after a defeat is more than double the joy of winning." So you can be sure there'll be, on balance, more misery than elation at the end of this tournament...and for that matter, any tournament or league play (where data for the study was collected).
This finding is analogous to a fundamental concept in behavioral finance: loss aversion, the idea that losses generally have twice the psychological impact than gains of the same size (i.e.., a $100 loss is felt more acutely than a $100 gain). But whereas people will typically take actions to avoid losses when investing (often at the expense of potential gains), when it comes to football people happily support their teams, year after year, despite the high probability of disappointment. Consider the English Premier League (EPL), the world's most popular football league. As ING's analysts point out, over the five seasons from 2014-2019 only three teams (Manchester City, Tottenham and Arsenal) out of 20 have won at least half their games. Fans supporting the other 17 clubs were more than likely to experience loss.
Back to the study...the University of Sussex team "analysed three million responses from 32,000 people on a smartphone app called Mappiness, which periodically asks users how they are feeling, what they are doing, where they are and who they are with.. By combining this rich data with GPS locations of football stadia and times and results of football matches over three years, [researchers] were able to pinpoint football fans and monitor their mood in the build-up to and after matches."
The results: on average, fans were 3.9 percentage points happier in the hour following a win, dropping off to 1.3 and 1.1 points in the second and third hours. A defeat, meanwhile, caused a drop in happiness of 7.8 points in the first hour, and 3.1 and 3.2 points in the second and third hour.
In other words, losses were felt more keenly wins and for longer! Moreover, joy and pain were felt 3x-4x more strongly when watching games in the stadium versus viewing at home.
Therein lies the paradox. Most people enthuse about the joy the football brings them. Yet, empirically the average football match (if we extrapolate the EPL results) leads to unhappiness. As the Sussex team points out: "Continuing to follow a team even though it causes more pain than pleasure looks irrational from a traditional economic perspective." So why do tens of millions of people do so? The two most persuasive reasons are:
1. Identity. People like to be associated with groups and crave camaraderie. That's the whole basis of social media. Allegiance to a team (local or international) can provide individuals with a shared sense of belonging and purpose that can transcend the pain of losing. In fact, international tournaments like the current Euro2020 or the World Cup can fuel national unity and trust in ways very few other events can.
2. The entire experience can be addictive. Akin to gambling, where individuals know the odds of winning are small, yet will happily participate for the excitement and rush. Adding to this point, the researchers also found that fans systematically over-estimate the probability of their team winning and never revise or learn from experience. Of course!
As I write this, the Czech Republic just eliminated the Netherlands 2-0 from the Euro2020. Czechoslovakia has a population of 10 million, Holland 17 million. That means 3.4x more pain than joy in the aftermath of that match. Will that lead to a sad (low productivity) Monday across the Netherlands? As Peter Dolton, a co-author of the study notes: "Football is the biggest sport on the planet and the way it makes us feel is hugely important for economies, and very interesting for economists."
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