Pump-Faking the Effort? Evidence from NBA Players’ Contracts

36 Pages Posted: 25 Feb 2021

See all articles by Qingliang Fan

Qingliang Fan

The Chinese University of Hong Kong

Jaimie W. Lien

The Chinese University of Hong Kong (CUHK) - Department of Decision Sciences & Managerial Economics

Meng Lin

University of San Francisco

Jie Zheng

Tsinghua University - School of Economics & Management

Date Written: January 20, 2021

Abstract

We examine the effect of contract-based incentives on the performance of NBA players using data from the 2004-05 to 2014-15 seasons. We find support for a contract year effect, meaning that players in the last season of their current contract improve their performance in order to secure better conditions in their next contract. In addition, having secured a big contract, players have an immediate incentive to shirk, resulting in significantly lower performance in their first year of the new contract. Higher ability players are generally less responsive to the contract year effect, while still exhibiting a big contract effect. Furthermore, these incentive effects are impacted in the intuitive directions by contract timing factors - contract year effects weaken with the number of years remaining in the contract, while the length of a new contract enhances the disincentive effect from a big contract. Overall, these findings provide robust evidence for dynamic incentive considerations in players' performances in a high stakes setting.

Keywords: contract effect, incentive effect, effort, shirking, sports

Suggested Citation

Fan, Qingliang and Lien, Jaimie W. and Lin, Meng and Zheng, Jie, Pump-Faking the Effort? Evidence from NBA Players’ Contracts (January 20, 2021). Available at SSRN: https://ssrn.com/abstract=3791435 or http://dx.doi.org/10.2139/ssrn.3791435

Qingliang Fan

The Chinese University of Hong Kong ( email )

Hong Kong

HOME PAGE: http://michaelqfan.weebly.com

Jaimie W. Lien (Contact Author)

The Chinese University of Hong Kong (CUHK) - Department of Decision Sciences & Managerial Economics ( email )

Shatin, N.T.
Hong Kong

Meng Lin

University of San Francisco ( email )

San Francisco, CA 94117
United States

Jie Zheng

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

HOME PAGE: http://jzheng.weebly.com/

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