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Playing For Keeps: Pay And Performance In The Nba

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  • KEVIN J. STIROH

Abstract

"This paper examines contract-related incentive effects using a unique dataset on individual performance and individual contracts. Evidence from professional basketball players in the 1980s and 1990s shows that individual performance improves significantly in the year before signing a multi-year contract but declines after the contract is signed. One interpretation is that workers strategically increase effort to obtain the most lucrative, multi-year contract but then reduce it once the contract is locked in. This highlights the double-edged nature of long-term contracts: good for employers when workers are fighting for them, but less so when workers have them." ("JEL" J22, J3) Copyright 2006 Western Economic Association International.

Suggested Citation

  • Kevin J. Stiroh, 2007. "Playing For Keeps: Pay And Performance In The Nba," Economic Inquiry, Western Economic Association International, vol. 45(1), pages 145-161, January.
  • Handle: RePEc:bla:ecinqu:v:45:y:2007:i:1:p:145-161
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. repec:kap:iaecre:v:19:y:2013:i:3:p:215-232 is not listed on IDEAS
    2. Elisabetta Iossa & Patrick Rey, 2014. "Building Reputation For Contract Renewal: Implications For Performance Dynamics And Contract Duration," Journal of the European Economic Association, European Economic Association, vol. 12(3), pages 549-574, June.
    3. Harald Oberhofer & Marian Schwinner, 2017. "Do individual salaries depend on the performance of the peers? Prototype heuristic and wage bargaining in the NBA," Department of Economics Working Papers wuwp247, Vienna University of Economics and Business, Department of Economics.
    4. Christoph Bühren & Stefan Krabel, 2015. "Individual Performance after Success and Failure - A Natural Experiment," MAGKS Papers on Economics 201505, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    5. Martinez Leonardo, 2009. "Reputation, Career Concerns, and Job Assignments," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-29, May.
    6. Martinez, Leonardo, 2009. "A theory of political cycles," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1166-1186, May.
    7. Bernd Frick & Rob Simmons, 2014. "The footballers’ labour market after the Bosman ruling," Chapters,in: Handbook on the Economics of Professional Football, chapter 13, pages 203-226 Edward Elgar Publishing.
    8. Garner, Jacqueline & Humphrey, Phillip R. & Simkins, Betty, 2016. "The business of sport and the sport of business: A review of the compensation literature in finance and sports," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 197-204.
    9. Andrew T. Foerster & Leonardo Martinez, 2006. "Are we working too hard or should we be working harder? A simple model of career concerns," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 79-91.
    10. Leonardo Martinez, 2009. "Why could political incentives be different during election times?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 315-334.
    11. Heather O’Neill, 2013. "Do Major League Baseball Hitters Engage in Opportunistic Behavior?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 19(3), pages 215-232, August.
    12. Müller, Michael, 2016. "The strongest link in a weak team? Performance of players with and without outside options in relegated football clubs," Discussion Papers of the Institute for Organisational Economics 07/2016, University of Münster, Institute for Organisational Economics.

    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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