Do Tournaments Have Incentive Effects?

Abstract

Much attention has been devoted to studying models of tournaments or situations in which an individual's payment depends only on his or her output or rank relative to that of other competitors. Academic interest derives from the fact that under certain sets of assumptions, tournaments have desirable normative properties because of the incentive structures they provide. Our paper uses nonexperimental data to test whether tournaments actually elicit effort responses. We focus on professional golf tournaments because information on the incentive structure (prize distribution) and measures of individual output (players' scores) are both available. We find strong support for the proposition that the level and structure of prizes in PGA tournaments influence players' performance.