For the Love of the Game? The Effect of Financial Incentives on Student-Athlete Performance.

Abstract

Performance may be motivated by monetary incentives, notions of fairness, or intrinsic motivation. However, empirically testing the role of performance motivators is difficult due to a lack of randomized experiments in the real world. We use novel and granular data on more than 37,000 unique athletes following the change in the NCAA’s Name, Image, and Likeness (NIL) rule to examine the role of monetary incentives in college swimming, basketball, and hockey. This quasi-natural experiment created a $1 billion market for domestic, but not international student-athletes. We use a difference-in-differences strategy to test whether the increased financial incentive for domestic student athletes led to changes in their performance relative to international students. We find that when effort is multi-dimensional, financial incentives cause distortions by steering player effort towards offensive plays, to the detriment of team performance.

Keywords: Incentives, Performance, NIL

JEL Classification: G50, J30