To Race or to Place?

Abstract

The authors use race-level data from 2003 and 2004 to test von Allmen's hypothesis regarding the inefficiency of the NASCAR reward system, where compensation is in the form of points that are accumulated throughout a season. They define drivers as two types, skilled and unskilled. Skilled drivers are hypothesized to be less aggressive than unskilled drivers because they are more productive given the same effort. Accordingly, an unskilled driver must be more aggressive than a skilled one to gain more compensation. The authors test this assertion empirically by modeling accidents as a proxy for aggression. They find that drivers who demonstrate skill in earlier races are less likely to get into accidents in subsequent races, suggesting there is a skill-level difference among drivers.