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You WILL IMPROVE and get Better Quicker by Moving Up. BUT, if you feel your not ready, it's your call. The one thing about this sport is people REALLY like the Sand Bagger term....
Your ready to move up.
Play Rec until your rating starts with a 9. It's a fallacy that players play better by playing up. Players get better by practicing.
Everything I know about behavioral psychology agrees with Chuck's conclusion that it is a fallacy that you get better by playing up. It would be interesting to test the conclusion mathmatically with PDGA data. For instance you could plot data from non-Masters aged amateur players with Intermediate ratings from two years ago. On the y axis plot % occasions of playing up and on the x axis plot change in rating over two years. Chuck's theory would be confirmed by a declining curve.
We've already shown statistically that the average rating of the group you are playing with does not impact how well you shoot. Climo dominated for all of those years and never played with a group whose rating averaged higher than his.
Climo might not be the best example. He isn't exactly your "average" player.
He's just the most extreme example of someone who never got a "break" getting to play with players better than him. Yet they didn't drag him down.
You'd think all those "bagger" threads would refute the notion that you need to play tournaments against better players to improve. Besides, generally speaking if you move up you only play the first round with better players; after that you're grouped with players who just shot the same as you.
The one other thing I would say about moving up to improve your game is this. For various reasons I sometimes play up from Intermediate. This past weekend I played up. I don't see much benefit in playing up unless you play up to a pro division. Even then, you need to pay attention to what these guys are doing that you are not.