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Do Financial Incentives Affect The Quality of Expert Performance? Evidence from the Racetrack

Author

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  • Glenn Boyle

    (Victoria University of Wellington)

Abstract

Does the quality of performance by experts respond to financial incentives? I provide some new evidence on this question by examining the propensity of racehorse trainers to undertake effort-diverting actions. In a sample of 30426 horse races, I find that lower race stakes are strongly associated with more unexpected outcomes, consistent with more trainers exerting less-than-full effort in such races. These results continue to hold when low-information races are excluded from the sample, thereby ruling out the possibility that stake is simply a proxy for the level of information that is available to bettors. Moreover, in a sub-sample of 4416 races for which final odds data are available, the dispersion in odds is positively related to race stake, consistent with rational bettors recognising the incentives faced by trainers and incorporating this insight in their investments. As a group, horse trainers apparently tailor the quality of their services to the potential size of their remuneration from clients.

Suggested Citation

  • Glenn Boyle, 2008. "Do Financial Incentives Affect The Quality of Expert Performance? Evidence from the Racetrack," Journal of Gambling Business and Economics, University of Buckingham Press, vol. 2(2), pages 43-59, September.
    • Handle: RePEc:buc:jgbeco:v:2:y:2008:i:2:p:43-59
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    Cited by:

    1. Alasdair Brown, 2012. "Examining Agency Conflict in Horse Racing," Southern Economic Journal, John Wiley & Sons, vol. 79(2), pages 388-398, October.

    More about this item

    Keywords

    INCENTIVES; PERFORMANCE; QUALITY; EXPERTS; RACEHORSES;
    All these keywords.

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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