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Consistency or Heroics: Skewness, Performance, and Earnings on the PGA TOUR

  • Stephen Shmanske


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    The structure of the payments in professional golf tournaments is heavily weighted to reward the top performers more handily. On the PGA TOUR, for example, the winner typically receives 18% of the purse, second place receives 10.8%, and so on down to 0.2% for 70th place. This payment structure brings up the possibility that the PGA TOUR is disproportionately rewarding one-time, exceptional performances rather than consistent steady play. To examine the extent of this effect, this paper correlates the 2002 earnings of the top 100 PGA TOUR professional golfers with their average performances, the variance around the averages, and the skewness of the individual distributions of their scores. Mean performance, variance, and skewness are all significantly related to earnings per tournament in the theoretically predicted directions. The research makes connections to and has implications for several topics in the sports economics literature including competitive balance and the hot-hand phenomenon. Additionally, it uncovers a heretofore unappreciated consequence concerning the relationships among the distributions of effort, performance, and remuneration in the tournaments compensation model. Copyright International Atlantic Economic Society 2007

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    Article provided by International Atlantic Economic Society in its journal Atlantic Economic Journal.

    Volume (Year): 35 (2007)
    Issue (Month): 4 (December)
    Pages: 463-471

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    Handle: RePEc:kap:atlecj:v:35:y:2007:i:4:p:463-471
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    1. Ronald G. Ehrenberg & Michael L. Bognanno, 1988. "Do Tournaments Have Incentive Effects?," NBER Working Papers 2638, National Bureau of Economic Research, Inc.
    2. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December.
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    4. 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.
    5. Martin B. Schmidt & David J. Berri, 2001. "Competitive Balance and Attendance: The Case of Major League Baseball," Journal of Sports Economics, , vol. 2(2), pages 145-167, May.
    6. Patrick James Rishe, 2001. "Differing Rates of Return to Performance," Journal of Sports Economics, , vol. 2(3), pages 285-296, August.
    7. Andrew S. Zimbalist, 2002. "Competitive Balance in Sports Leagues: An Introduction," Journal of Sports Economics, , vol. 3(2), pages 111-121, May.
    8. Szymanski, Stefan, 2001. "Income Inequality, Competitive Balance and the Attractiveness of Team Sports: Some Evidence and a Natural Experiment from English Soccer," Economic Journal, Royal Economic Society, vol. 111(469), pages F69-84, February.
    9. Gerald W. Scully, 2002. "The Distribution of Performance and Earnings in a Prize Economy," Journal of Sports Economics, , vol. 3(3), pages 235-245, August.
    10. 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.
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