In a world of asymmetric information and non-trivial monitoring costs, the design and implementation of a compensation and reward system that maximizes the individual athlete's performance is one of the critical variables affecting the reputation of a specific sports event. Assuming that the relationship between a race organizer and a professional runner can be characterized as a principal agent-relationship, we use detailed data from 57 city marathons to test various hypotheses derived from tournament theory. Controlling for a large number of other possible determinants of race quality, we find that the level of the prize money as well as its distribution influence the participants’ performance in the predicted way. When examined in more detail, however, the incentive effects diminish.
AbrahamK., & FarberH. (1987). Job duration, seniority, and earnings. American Economic Review, 77, 278–297.
2.
AltonjiJ. G., & ShakotkoR. A. (1987). Do wages rise with job seniority?Review of Economic Studies, 54, 437–459.
3.
AlchianA. A. (1988). Promotions, elections and other contests: Comment. Journal of Institutional and Theoretical Economics, 144, 91–93.
4.
BognannoM. L. (2001). Corporate tournaments. Journal of Labor Economics, 19, 290–315.
5.
BratsbergB., & TerrellD. (1998). Experience, tenure, and wage growth of young black and white men. Journal of Human Resources, 33, 658–682.
6.
BullC., SchotterA., & WeigeltK. (1987). Tournaments and piece rates: An experimental study. Journal of Labor Economics, 95, 1–33.
7.
ClarkD. J., & RiisC. (1996). Rank-order tournaments and selection (Memorandum No. 27). Department of Economics, University of Oslo.
8.
CooperW. H., GrahamW. J., & DykeL. S. (1993). Tournament players. Research in Personnel and Human Resources Management, 11, 83–132.
9.
DyeR. (1984). The trouble with tournaments. Economic Inquiry, 22, 147–149.
10.
EhrenbergR. G., & BognannoM. L. (1990a). Do tournaments have incentive effects? Journal of Political Economy, 98, 1307–1324.
11.
EhrenbergR. G., & BognannoM. L. (1990b). The incentive effects of tournaments revisited: Evidence from the European PGA Tour. Industrial and Labor Relations Review, 43, 74–88.
12.
ErikssonT. (1999). Executive compensation and tournament theory: Empirical effects on Danish data. Journal of Labor Economics, 17, 262–280.
13.
GarenJ. E. (1988). Empirical studies of the job matching hypothesis. Research in Labor Economics, 9, 187–224.
14.
GreenJ. R., & StokeyN. L. (1983). A comparison of tournaments and contracts. Journal of Political Economy, 91, 349–364.
15.
HallS., SzymanskiS., & ZimbalistA. (2002). Testing causality between team performance and payroll: The case of Major League Baseball and English soccer. Journal of Sports Economics, 3, 149–168.
16.
HausmanJ. (1978). Specification tests in econometrics. Econometrica, 46, 1251–1271.
17.
HeckmanJ. (1979). Sample selection bias as a specification error. Econometrica, 47, 153–161.
18.
KnoeberC. R. (1989). A real game of chicken: Contracts, tournaments, and the production of broilers. Journal of Law, Economics & Organization, 5, 271–292.
19.
KnoeberC. R., & ThurmanW. N. (1994). Testing the theory of tournaments: An empirical analysis of broiler production. Journal of Labor Economics, 12, 155–179.
20.
LazearE. P. (1992). Compensation, productivity and the new economics of personnel. In LewinD. S., MitchellO. S., & P. Sherer (Eds.), Research frontiers in industrial relations and human resources (pp. 341–380). Madison, WI: Industrial Relations Research Association.
21.
LazearE. P. (1998). Personnel economics for managers. New York: John Wiley.
22.
LazearE. P., & RosenS. (1981). Rank-order tournaments as optimum labor contracts. Journal of Political Economy, 89, 841864.
23.
LaliveR., LuchsingerC., & WildJ. (2003). Do wages rise with job seniority? The Swiss case. Swiss Journal of Economics and Statistics, 139, 207–229.
24.
LynchJ. G., & ZaxJ. S. (2000). The rewards to running: Prize structure and performance in professional road racing. Journal of Sports Economics, 1, 323–340.
25.
MaloneyM. T., & McCormickR. E. (2000). The response of workers to wages in tournaments: Evidence from foot races. Journal of Sports Economics, 1, 99–123.
26.
McLaughlinK. J. (1988). Aspects of tournament models: A survey. Research in Labor Economics, 9, 225–256.
27.
NalebuffB. J., & StiglitzJ. E. (1983). Prizes and incentives: Towards a general theory of compensation and competition. Bell Journal of Economics, 14, 21–43.
28.
O’KeefeM.,ViscusiW. K., & ZeckhauserR. J. (1984). Economic contests: Comparative reward schemes. Journal of Labor Economics, 2, 27–56.
29.
OrszagJ. M. (1994). A new look at incentive effects and golf tournaments. Economics Letters, 46, 77–88.
30.
RosenS. (1986). Prizes and incentives in elimination tournaments. American Economic Review, 76, 701–715.
31.
RuhmC. J. (1990). Do earnings increase with job seniority?Review of Economics and Statistics, 72, 143–147.
32.
RosenS. (1988). Promotions, elections and other contests. Journal of Institutional and Theoretical Economics, 144, 73–90.
33.
SteffnyH. (1997). Deutsche Frauen top—Kenia auf dem Vormarsch. Spiridon, 23, 47–49.
