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Road Warrior Booty: Prize Structures in Motorcycle Racing

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  • Maloney Michael T.

    ()
    (Clemson University)

  • Terkun Kristina

    ()
    (Clemson University)

Abstract

This research reports the results of an analysis of prize structures among competing firms paying tournament wages. In motorcycle racing, sponsors compete in an auction for riders using tournament prizes as bids. Since racers can only ride one bike and wear one helmet, they are forced to choose among sponsors of similar products. We find that in the face of competition, sponsors are forced to lower the incentive intensity of their prize differentials as rival sponsors post larger purses. Our test offers new corroboration of the Lazear-Rosen tournament model. Other researchers have found that workers respond to bigger prize differentials by working harder. We find that firms recognize this and also recognize that in the competitive labor-market equilibrium this extra work must be compensated by offering higher expected wages through bigger purses. Our results complete the theoretical circle: workers respond to the incentive effects of tournament wages and firms anticipate this behavior when making tournament wage offers.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 1 (2002)
Issue (Month): 1 (April)
Pages: 1-18

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Handle: RePEc:bpj:bejeap:v:contributions.1:y:2002:i:1:n:3

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Cited by:
  1. Markus LANG & Alexander RATHKE & Marco RUNKEL, 2010. "The Economic Consequences Of Foreigner Rules In National Sports Leagues," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 31, pages 47-64.
  2. Fran├žois Rycx & Thierry Lallemand & Robert Plasman, 2008. "Women and competition in elimination tournaments: evidence from professional tennis data," ULB Institutional Repository 2013/5607, ULB -- Universite Libre de Bruxelles.
  3. Helmut Dietl & Egon Franck & Martin Grossmann & Markus Lang, 2009. "Contest Theory and its Applications in Sports," Working Papers 0913, International Association of Sports Economists;North American Association of Sports Economists, revised Mar 2011.
  4. Frick, Bernd & Humphreys, Brad, 2011. "Prize Structure and Performance: Evidence from NASCAR," Working Papers 2011-12, University of Alberta, Department of Economics.

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