Documenting the functional form of dynamic risk-taking behaviour in a real options context using sporting contests

Changes in risk-taking behaviour based on interim performance are examined in high-stakes competition. A real options framework is used to provide a richer characterisation of risk-taking behaviour than examined in extant studies. This framework is applied to an examination of ball-by-ball data from 1207 cricket matches. Consistent with modelled expectations, risk taking is found to increase (decrease) at a decreasing rate following below par (above par) interim performance. This result is especially strong in situations where the resources remaining are low, a result predicted by the real options model.