CEU Electronic Theses and Dissertations, 2023
| Author | Parragi, Balint |
|---|---|
| Title | Can Changes in the Incentive Scheme Prevent Agents from Strategic Shirking? Evidence from the NBA Play-In Tournament |
| Summary | Incentive adjustments are crucial in principal-agent problems. Tournament theory, proposed by Lazear and Rosen (1981), offers an incentive structure that rewards agents based on their ordinal ranking. Drawing on this theory, the reward scheme should be designed in a way that agents are motivated to engage in the tournament and compete for higher compensation like promotion instead of motivated to not exert any effort. Professional sports offer a unique opportunity to analyze the effects of changes in incentives to increase competitiveness and reduce shirking. The National Basketball Association (NBA) recently introduced a change to the reward system referred to as the play-in tournament (PI), allowing more teams to have a chance to compete for advancing to the final phase of the championship. This thesis is the first to explore the impact of the PI on team performance. Using observational data, I compare the eligibility for the PI in two periods, before and after the tournament was implemented. The research question is whether being eligible for the PI has a different impact on a team’s likelihood of winning a game and on its risk-taking preferences in the two periods. The findings indicate that following the introduction of the play-in tournament, there is no discernible impact on team winning performance associated with eligibility for the tournament, but there are signals of increased risk-seeking behavior in some cases. Despite the absence of such effects on winning performance, the popularity of the play-in tournament among teams and fans suggests its potential for long-term existence. |
| Supervisor | Bekes, Gabor |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2023/parragi_balint.pdf |
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