Abstract:
This paper analyzes the incentives of professional tennis players in a tournament setting, as a proxy for workers in a firm. Previous studies have asserted that workers exert more effort when monetary incentives are increased, and that effort is maximized when marginal pay dispersion varies directly with position in the firm. We test these two tenets of tournament theory using a new data set, and also test whether other “intangible factors,” such as firm pride or loyalty, drive labor effort incentives. To do this, we analyze the factors that incentivize tennis players to exert maximal effort in two different settings, tournaments with monetary incentives (Grand Slams) and tournaments without monetary incentives (the Davis Cup), and compare the results. We find that effort exertion increases with greater monetary incentive, and that certain intangible factors can often have an effect on player incentives.
