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Prize Structure and Performance: Evidence from NASCAR

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Author Info

  • Frick, Bernd

    () (University of Paderborn)

  • Humphreys, Brad

    () (University of Alberta, Department of Economics)

Abstract

The predictions that emerge from tournament theory have been tested in a number of sports-related settings. Since sporting events involving individuals (golf, tennis, running, auto racing) feature rank order tournaments with relatively large payoffs and easily observable outcomes, sports is a natural setting for such tests. In this paper, we test the predictions of tournament theory using a unique race-level data set from NASCAR. Most of the previous tests of tournament theory using NASCAR data have used either season level data or race level data from a few seasons. Our empirical work uses race level NASCAR data for 1,114 races over the period 1975-2009. Our results support the predictions of tournament theory: the larger the spread in prizes paid in the race, measured by the standard deviation of prizes paid or the interquartile range of prizes paid, the higher the average speed in the race. Our results account for the length of the track, the number of entrants, the number of caution flags, and unobservable year and week heterogeneity.

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Bibliographic Info

Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2011-12.

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Length: 19 pages
Date of creation: 01 Aug 2011
Date of revision:
Handle: RePEc:ris:albaec:2011_012

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Keywords: NASCAR; tournament theory;

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References

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  1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
  2. François 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. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June.
  4. J. Brian O'Roark & William C. Wood, 2004. "Safety at the Racetrack: Results of Restrictor Plates in Superspeedway Competition," Southern Economic Journal, Southern Economic Association, vol. 71(1), pages 118-129, July.
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  7. Russell S. Sobel & Todd M. Nesbit, 2007. "Automobile Safety Regulation and the Incentive to Drive Recklessly: Evidence from NASCAR," Southern Economic Journal, Southern Economic Association, vol. 74(1), pages 71-84, July.
  8. Michael T. Maloney & Kristina Terkun, 2002. "Road Warrior Booty: Prize Structures in Motorcycle Racing," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 0(1), pages 3.
  9. Ronald G. Ehrenberg & Michael L. Bognanno, 1990. "The incentive effects of tournaments revisited: Evidence from the European PGA tour," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 74-88, February.
  10. Ronald G. Ehrenberg & Michael L. Bognanno, 1988. "Do Tournaments Have Incentive Effects?," NBER Working Papers 2638, National Bureau of Economic Research, Inc.
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  12. Bentley Coffey & M. T. Maloney, 2010. "The Thrill of Victory: Measuring the Incentive to Win," Journal of Labor Economics, University of Chicago Press, vol. 28(1), pages 87-112, 01.
  13. repec:sae:jospec:v:12:y:2011:i:3:p:253-283 is not listed on IDEAS
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