When Falling Just Short is a Good Thing: The Effect of Past Performance on Improvement

Abstract

Models of reference-dependent preferences show that an individual’s utility depends on the difference between the outcome and a “neutral” reference point. Our paper investigates how distance from reference points affects future performance. We find that round numbers and personal bests motivate runners and that missing the goal by a small amount improves future performance. For those who achieve their goal, future performance suffers slightly. In empirical analysis, we use an extensive panel of marathon data, which contains a past running history for every runner in our sample and allows us to estimate runners’ ability and experience.