Do Players Perform for Pay? An Empirical Examination via NFL Players' Compensation Contracts

39 Pages Posted: 1 Feb 2017 Last revised: 29 Jul 2017

See all articles by Seoyoung Kim

Seoyoung Kim

Santa Clara University

Atulya Sarin

Santa Clara University - Department of Finance

Saagar Sarin

University of Southern California

Date Written: July 28, 2017

Abstract

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

Suggested Citation

Kim, Seoyoung and Sarin, Atulya and Sarin, Saagar, Do Players Perform for Pay? An Empirical Examination via NFL Players' Compensation Contracts (July 28, 2017). Available at SSRN: https://ssrn.com/abstract=2909305 or http://dx.doi.org/10.2139/ssrn.2909305

Seoyoung Kim (Contact Author)

Santa Clara University ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States

Atulya Sarin

Santa Clara University - Department of Finance ( email )

Leavey School of Business and Administration
Santa Clara, CA 95053
United States
408-554-4953 (Phone)
408-904-4498 (Fax)

HOME PAGE: http://business.scu.edu/asarin

Saagar Sarin

University of Southern California

Los Angeles, CA 90089
United States

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