Potential, Prizes and Performance: Testing Tournament Theory with Professional Tennis Data

Abstract

This paper tests two hypotheses from the theory of elimination tournaments: (i) that uneventournaments, where the contestants are ex ante heterogeneous, entail lower effort exertion;this is a prediction from agency theory that has not been tested empirically before; and (ii)whether incentives set through prizes matter for effort exertion; this assumption underlies anyagency theory about elimination tournaments, and has been empirically tested in othercontexts. The evidence obtained with data from professional tennis tournaments supportsboth the assumption that incentives matter, as well as the theoretical implications concerninguneven tournaments among heterogeneous contestants.

Keywords: incentives in tournaments, tennis, uneven tournaments, elimination tournaments

JEL Classification: J41, J33, M12