Football, Statistics, and Agency Problems « The Baseline Scenario

Agency costs occur when the agent looks out for his or her own interests and not those of whom hired him/her. The typical example of this is when manager looks out for his/her personal pay and not the returns of the shareholders.

That said the world is full of examples of such conflicts. The Baseline Scenario provides a wonderful example using football. Specifically, the fact that football teams punt much more than they should. Probably the best explanation of this is that the coaches do not want to be criticized for "going for it" even if "going for it" is better for the team.

Football, Statistics, and Agency Problems « The Baseline Scenario:

"The conclusion (PDF p. 14) is that over most of the field you should go for it if you have four or fewer yards to go; there is a big spike around the opponent’s 33-yard line where you should go for it even on fourth and nine, because the net field position benefit of punting is low and the expected point value of attempting a field goal is low.

The implication, of course, is that football teams don’t maximize. Romer concedes that making the right decision on fourth down would lead to about one more win every three years, and this is probably outweighed by the asymmetric returns: you are more likely to be penalized (as a coach) if you go against convention and are wrong than if you follow convention, since the fans (and the owners) are more likely to notice departures from convention. So the incentives of football coaches are not simply to maximize points, but also to maintain their reputations."