IDEAS home Printed from https://ideas.repec.org/a/sae/jospec/v2y2001i1p62-79.html
   My bibliography  Save this article

Is the Reward System in NASCAR Efficient?

Author

Listed:
  • Peter Von Allmen

    (Moravian College)

Abstract

This article provides an overview of compensation and reward schemes in professional automobile racing (NASCAR). Data from the 1998 and 1999 racing seasons show that although end-of-season rewards are highly nonlinear, individual races offer rewards that are more linear. Given that the general conditions for a rank order tournament do exist, this may indicate that the reward scheme is inefficient. Several hypotheses are suggested to explain why NASCAR would create such a reward structure. Vital to the investigation is the fact that teams attempt to maximize a profit function more complex than those in other individual sports. In addition, drivers may exhibit excessively aggressive behavior that would be exacerbated by nonlinear compensation, as described by Lazear. Analysis shows that the need to maintain sponsorship exposure, combined with drivers’ willingness to take risks (and the possible catastrophic result of negative outcomes), creates a competitive environment where winner-take-all would be inefficient.

Suggested Citation

  • Peter Von Allmen, 2001. "Is the Reward System in NASCAR Efficient?," Journal of Sports Economics, , vol. 2(1), pages 62-79, February.
    • Handle: RePEc:sae:jospec:v:2:y:2001:i:1:p:62-79
    DOI: 10.1177/152700250100200106
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/152700250100200106
    Download Restriction: no
    File URL: https://libkey.io/10.1177/152700250100200106?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. O'Keeffe, Mary & Viscusi, W Kip & Zeckhauser, Richard J, 1984. "Economic Contests: Comparative Reward Schemes," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 27-56, January.
    3. Ehrenberg, Ronald G & Bognanno, Michael L, 1990. "Do Tournaments Have Incentive Effects?," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1307-1324, December.
    4. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-580, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thierry Lallemand & Robert Plasman & François Rycx, 2008. "Women and Competition in Elimination Tournaments," Journal of Sports Economics, , vol. 9(1), pages 3-19, February.
    2. Brad Humphreys & Bernd Frick, 2019. "Prize Structure and Performance: Evidence from NASCAR," Economies, MDPI, vol. 7(4), pages 1-13, October.
    3. Chris Judde & Ross Booth & Robert Brooks, 2013. "Second Place Is First of the Losers," Journal of Sports Economics, , vol. 14(4), pages 411-439, August.
    4. Thierry Lallemand & Robert Plasman & François Rycx, 2005. "Women and competition in elimination tournaments: evidence from professional tennis data," DULBEA Working Papers 05-19.RS, ULB -- Universite Libre de Bruxelles.
    5. David M. Yaskewich, 2017. "Heterogeneous Ability and Risk Taking in a Rank-Order Tournament," Journal of Sports Economics, , vol. 18(8), pages 803-830, December.
    6. Craig A. Depken II & Matthew Hood & Ernest King, 2017. "Consistency and Momentum in NASCAR," Journal of Sports Economics, , vol. 18(6), pages 601-621, August.
    7. XiaoGang Che & Brad R. Humphreys, 2013. "Earnings and performance in women’s skiing," Chapters, in: Eva Marikova Leeds & Michael A. Leeds (ed.), Handbook on the Economics of Women in Sports, chapter 6, pages 115-131, Edward Elgar Publishing.
    8. Bernd Frick, 2003. "Contest Theory and Sport," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(4), pages 512-529, Winter.
    9. Alan Deck & Cary Deck & Zhen Zhu, 2014. "Decision Making in a Sequential Game," Journal of Sports Economics, , vol. 15(2), pages 132-149, April.
    10. Jason P. Berkowitz & Craig A. Depken II & Dennis P. Wilson, 2011. "When Going in Circles is Going Backward: Outcome Uncertainty in NASCAR," Journal of Sports Economics, , vol. 12(3), pages 253-283, June.
    11. Russell S. Sobel & Todd M. Nesbit, 2007. "Automobile Safety Regulation and the Incentive to Drive Recklessly: Evidence from NASCAR," Southern Economic Journal, John Wiley & Sons, vol. 74(1), pages 71-84, July.
    12. Matthew S. Bothner & Young-Kyu Kim & Edward Bishop Smith, 2012. "How Does Status Affect Performance? Status as an Asset vs. Status as a Liability in the PGA and NASCAR," Organization Science, INFORMS, vol. 23(2), pages 416-433, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tor Eriksson & Sabrina Teyssier & Marie‐Claire Villeval, 2009. "Self‐Selection And The Efficiency Of Tournaments," Economic Inquiry, Western Economic Association International, vol. 47(3), pages 530-548, July.
    2. Josse Delfgaauw & Robert Dur & Arjan Non & Willem Verbeke, 2015. "The Effects of Prize Spread and Noise in Elimination Tournaments: A Natural Field Experiment," Journal of Labor Economics, University of Chicago Press, vol. 33(3), pages 521-569.
    3. Matthias Kräkel, 2006. "Splitting Leagues," Journal of Economics, Springer, vol. 88(1), pages 21-48, June.
    4. Jeanine Miklós-Thal & Hannes Ullrich, 2016. "Career Prospects and Effort Incentives: Evidence from Professional Soccer," Management Science, INFORMS, vol. 62(6), pages 1645-1667, June.
    5. Sun, Sophia Li & Habib, Ahsan, 2020. "Determinants and consequences of tournament incentives: A survey of the literature in accounting and finance," Research in International Business and Finance, Elsevier, vol. 54(C).
    6. P.-J. Jost & M. Kräkel, 2005. "Preemptive behavior in sequential-move tournaments with heterogeneous agents," Economics of Governance, Springer, vol. 6(3), pages 245-252, November.
    7. Bernd Irlenbusch, 2006. "Experimental perspectives on incentives in organisations," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 14(1), pages 1-24, February.
    8. Tor Eriksson & Sabrina Teyssier & Marie Claire Villeval, 2006. "Effort Self-Selection and the Efficiency of Tournaments," Post-Print halshs-00142876, HAL.
    9. Ajay Kalra & Mengze Shi, 2001. "Designing Optimal Sales Contests: A Theoretical Perspective," Marketing Science, INFORMS, vol. 20(2), pages 170-193, December.
    10. Cedric Duvinage & Peter-J. Jost, 2019. "The Role of Referees in Professional Sports Contests," Journal of Sports Economics, , vol. 20(8), pages 1014-1050, December.
    11. Harbring, Christine & Irlenbusch, Bernd, 2003. "An experimental study on tournament design," Labour Economics, Elsevier, vol. 10(4), pages 443-464, August.
    12. James G. Lynch & Jeffrey S. Zax, 2000. "The Rewards to Running," Journal of Sports Economics, , vol. 1(4), pages 323-340, November.
    13. Waldman, Michael, 2013. "Classic promotion tournaments versus market-based tournaments," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 198-210.
    14. Wu, Qin & Bayer, Ralph-C & Lenten, Liam J.A., 2020. "Conditional Pension Funds to Combat Cheating in Sporting Contests: Theory and Experimental Evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 89(C).
    15. Loukas Balafoutas & E. Glenn Dutcher & Florian Lindner & Dmitry Ryvkin, 2017. "The Optimal Allocation Of Prizes In Tournaments Of Heterogeneous Agents," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 461-478, January.
    16. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    17. Kato, Takao & Shu, Pian, 2016. "Competition and social identity in the workplace: Evidence from a Chinese textile firm," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 37-50.
    18. repec:ver:wpaper:12/2012 is not listed on IDEAS
    19. Duran, Mihael, 2011. "Nachträgliche Reduktion von Vorstandsbezügen: Eine ökonomische Analyse der Herabsetzungsmöglichkeit von Vorstandsbezügen nach dem VorstAG [Ex post Reduction of Executive Compensation: An economic r," MPRA Paper 33815, University Library of Munich, Germany.
    20. Beck A. Taylor & Justin G. Trogdon, 2002. "Losing to Win: Tournament Incentives in the National Basketball Association," Journal of Labor Economics, University of Chicago Press, vol. 20(1), pages 23-41, January.
    21. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 3, pages 229-330, Elsevier.
    22. Benno Torgler & Sascha L. Schmidt & Bruno S. Frey, 2006. "Relative Income Position And Performance: An Empirical Panel Analysis," IEW - Working Papers 268, Institute for Empirical Research in Economics - University of Zurich.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:jospec:v:2:y:2001:i:1:p:62-79. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.