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Do Employers Pay for Consistent Performance?: Evidence from the NBA

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Author Info

  • Bodvarsson, Orn B
  • Brastow, Raymond T

Abstract

In a world of uncertainty in which a worker's performance is variable over time and average performance is unknown when hiring, how will employers determine compensation? The authors develop a monitoring and signaling model where information is symmetric and parties are risk neutral. Monitoring costs increase with inconsistency, lowering pay for inconsistent workers. If discrimination exists, minority workers will be rewarded less than majority workers for improving consistency. Testing these and other predictions using National Basketball Association data, the authors find that consistent professional basketball players are paid more but, in contrast to previous studies, there is no evidence of discrimination. Copyright 1998 by Oxford University Press.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 36 (1998)
Issue (Month): 1 (January)
Pages: 145-60

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Handle: RePEc:oup:ecinqu:v:36:y:1998:i:1:p:145-60

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Cited by:
  1. D Berri & R Simmons, 2007. "Race and the evaluation of signal callers in the national football league," Working Papers 591147, Lancaster University Management School, Economics Department.
  2. Edoardo Gallo & Thomas Grund & J. James Reade, 2013. "Punishing the Foreigner: Implicit Discrimination in the Premier League Based on Oppositional Identity," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(1), pages 136-156, 02.
  3. Lawrence M. Kahn, 2000. "The Sports Business as a Labor Market Laboratory," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 75-94, Summer.
  4. Kahn, Lawrence M., 2009. "The Economics of Discrimination: Evidence from Basketball," IZA Discussion Papers 3987, Institute for the Study of Labor (IZA).
  5. Quinn Andrew Wesley Keefer, 2013. "Compensation Discrimination for Defensive Players," Journal of Sports Economics, , vol. 14(1), pages 23-44, February.
  6. Grund, Christian & Höcker, Jan & Zimmermann, Stefan, 2010. "Risk Taking Behavior in Tournaments: Evidence from the NBA," IZA Discussion Papers 4812, Institute for the Study of Labor (IZA).
  7. repec:ltr:wpaper:2010.04 is not listed on IDEAS
  8. Liam J A Lenten & Wayne Geerling & László Kónya, 2010. "A Hedonic Model of Player Wage Determination from the Indian Premier League Auction#," Working Papers 2010.04, School of Economics, La Trobe University.
  9. Lenten, Liam J.A. & Geerling, Wayne & Kónya, László, 2012. "A hedonic model of player wage determination from the Indian Premier League auction: Further evidence," Sport Management Review, Elsevier, vol. 15(1), pages 60-71.

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