Peter von Allmen

Is the Reward System in NASCAR Efficient

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.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 ineffi...

The Effect of Quantitative Prerequisites on Performance in Intermediate Microeconomics

Abstract The level of quantitative training required to pursue an undergraduate degree in economics is currently the subject of debate within the many departments of economics. Central to this issue is the effect of quantitative training in advance of economic theory courses. This article uses individual-level data to test the relationship between performance in quantitative prerequisites, specifically calculus courses, and performance in intermediate microeconomics at a liberal arts college. Results indicate that there is a strong link between performance in calculus courses and performance in intermediate microeconomics.

Teaching the Economics of Sports

Serious economic analysis of professional sports is a relatively new endeavor within the larger sphere of applied microeconomics. Although a smattering of articles appeared before 1980, most of the existing literature is much more recent. As a rough indicator, a query of academic publications using the Econlit database indicates that between 1900 and 1980, a total of just 24 journal publications appeared that covered baseball (10), basketball (8), football (6), and hockey (0). Since that time, research effort has increased dramatically, and the discipline has come into its own. The same search produces a total of 683 citations between 1981 and 2004. Perhaps the most significant indicator of the growth and recognition of the discipline is the emergence of the Journal of Sports Economics in 2000. Given the dramatic increase in research effort, it is no surprise that the study of the economics of sports has extended to the classroom. Economics of sports courses exist at the undergraduate level at approximately 70 U.S. colleges and universities and many schools outside the United States. In many cases, faculty want to share their own research interests. For others, the attraction is simply a known interest among students or the ability to conduct empirical research that students will find accessible and interesting. Students clearly find the class very attractive. Enrollments in sports courses at many schools substantially outpace enrollments in other economics classes. Although skeptics in some departments remain, the legitimacy of teaching undergraduate sports economics courses seems well-established. The purpose of this article is to describe the contents of a typical course, the resources available for faculty and students, and, finally, the challenges often cited by faculty who teach the course. For those who have not yet taught the course, I hope it can serve as a useful

Victims or Beneficiaries?: Wage Premia and National Origin in the National Hockey League

We add to the literature on migration and earnings by showing how migration affects one particularly highly skilled set of migrants: European hockey players. We examine salary differentials using a sample of newly signed free agents from the 2010-11 and 2011-12 seasons. We also apply several new productivity measures that sharpen the specification of the wage equation, especially regarding productivity on defense and special teams play. We find that European players receive a premium relative to otherwise identical Canadian and US-born players. We present evidence that this premium is due to the greater mobility of European players and their resulting access to alternative employment possibilities.