Risky Sports and the Value of Information

Abstract

We develop a theoretical account of how athletes engaged in risky sports value riskreducing information and use stated-preference data from a sample of backcountry skiers to empirically challenge the predictions of our model. Risk taking in this specific context depends on the athlete’s personal attitudes toward risky activities and his strategies to control the risk. Usage of specific information is one strategy of risk control. We estimate the demand value for avalanche information. Caution is however warranted because unobserved factors may jointly affect the athlete’s perception of risk and his willingness-to-pay for obtaining the information. We use a recursive two stage estimation approach to account for endogeneity concerns. Our results indicate that the demand value of information increases with wealth and perceived risk and tends to decrease with better skills to control risk and more information about the prevailing field conditions. These results support our theoretical predictions and suggest that variation in athletes’ WTP can be explained by their beliefs about the usefulness of information.

Keywords

JEL codes

Reference

Andrea M. Leiter, and Christoph Rheinberger, “Risky Sports and the Value of Information”, TSE Working Paper, n. 13-382, February 2013.