Just in time for this weekend's NFL draft and the scrambling by teams to trade up or down to get the "best" pick, Richard Thaler will be talking tomorrow morning at SMU. The paper he is presenting is "Loser’s Curse: Overconfidence vs. Market Efficiency in the National Football League Draft" and here's the abstract:

A question of increasing interest to researchers in a variety of fields is whether the incentives and experience present in many “real world” settings mitigate judgment and decision-making biases. To investigate this question, we analyze the decision making of National Football League teams during their annual player draft. This is a domain in which incentives are exceedingly high and the opportunities for learning rich. It is also a domain in which multiple psychological factors suggest teams may overvalue the “right to choose” in the draft – non-regressive predictions, overconfidence, the winner’s curse and false consensus all suggest a bias in this direction. Using archival data on draft-day trades, player performance and compensation, we compare the market value of draft picks with the historical value of drafted players. We find that top draft picks are overvalued in a manner that is inconsistent with rational expectations and efficient markets and consistent with psychological research.

Full paper available here.

As usual, the paper is well done and interesting. I will try to report on Thaler's presentation along with Vanderbilt's Luke Froeb's presentation of "Post-Merger Product Repositioning" at our (UTA) seminar series in the afternoon.

Wow - a fun day of listening to interesting economics (interrupted by an hour and a half or so of driving).

[UPDATE: Co-blogger Frank Stephenson emails to point out that the Thaler paper has been floating around for at least a year and that he had some good comments here. Such is the nature of economics publishing - a good paper might take three years or more to be published (this after two years or more of gathering data!) whereas a relatively low quality paper can be in print in less than a year.]