DP5851 Seemingly Irrelevant Events Affect Perceptions and Expectations - The FIFA World Cup 2006 as a Natural Experiment

Author(s): Thomas J Dohmen, Armin Falk, David Huffman, Uwe Sunde
Publication Date: September 2006
Keyword(s): expectation formation, macroeconomic outcomes, psychology, soccer World Cup, sunspots
JEL(s): D0, D8, E0
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5851

Prominent economic theories have emphasized the role of commonly held perceptions and expectations for determining macroeconomic outcomes. A key empirical question is how such collectively held beliefs are formed. We use the FIFA World Cup 2006 as a natural experiment. We provide direct evidence that seemingly irrelevant events (the outcomes of soccer matches) can systematically affect individual perceptions about economic prospects, both on a personal and economy-wide level.