Do Players Perform for Pay? An Empirical Examination via NFL Players' Compensation Contracts
39 Pages Posted: 1 Feb 2017 Last revised: 29 Jul 2017
Date Written: July 28, 2017
How to properly compensate and incentivize players is an important question in the realm of professional sports, and more broadly, is a central question in contract design. With the increasing use of performance-based compensation packages and tax law favoring such compensation design, a natural question arises as to whether workers do indeed perform for pay. We examine this question in a setting that is not fraught with the typical measurement and identification problems found in many pay-performance settings. Specifically, we examine changes in a NFL player’s Win Probability Added (WPA) and Expected Points Added (EPA) in response to his compensation-contract design. Overall, our paper provides evidence that players do indeed perform for (properly designed) pay, and has important implications for future work on compensation and incentive-based contract design.
Keywords: pay-performance sensitivity, incentive-based compensation, NFL, sports compensation, win probability added (WPA), expected points added (EPA), sports analytics
JEL Classification: J30, J33, G34, G39
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