Determining the drivers of player valuation and compensation in professional sport: traditional economic approaches and emerging advances

An overview of the literature studying player performance and salaries is provided. The chapter argues that the ‘traditional’ approaches tended to view the drivers of players’ salaries as falling into one of four broad categories – experience, performance, talent, and popularity. It notes that using just these traditional drivers is deficient in that, collectively, they usually fail to explain 30 to 40 percent of the variation in salaries. It then discusses new advances in the literature that attempt to better incorporate into salary models factors like non-cognitive skills and work habits, and explains how researchers are now examining such player-characteristics as leadership skills, performance under pressure, and performance volatility to determine which, if any, of these factors may impact salary.