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Do players perform for pay? An empirical examination via NFL players’ compensation contracts

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  • Kim, Seoyoung
  • Sarin, Atulya
  • Sarin, Saagar

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.

Suggested Citation

  • Kim, Seoyoung & Sarin, Atulya & Sarin, Saagar, 2018. "Do players perform for pay? An empirical examination via NFL players’ compensation contracts," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 330-346.
    • Handle: RePEc:eee:jbfina:v:88:y:2018:i:c:p:330-346
    DOI: 10.1016/j.jbankfin.2018.01.004
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    References listed on IDEAS

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    More about this item

    Keywords

    Pay-performance sensitivity; Incentive-based compensation; NFL / sports compensation; Win Probability Added (WPA); Expected Points Added (EPA); Sports analytics;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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