Player contracts: risk sharing and incentives

Thomas Miceli ()

Chapter 9 in Topics in Sports Economics, 2025, pp 165-181 from Edward Elgar Publishing

Abstract: This chapter examines contracts between players and owners, with a particular focus on risk-sharing and incentives. Players prefer long-term contracts with guaranteed money to insure them against risk (assuming they are risk-averse), while owners prefer short-term, incentive-laden contracts to induce players to exert effort. Actual contracts balance these factors by providing a base salary combined with incentive clauses that link pay to observed performance. The chapter concludes by discussing the team production problem, which complicates the ability of team owners to assess the contribution of individual players. Two devices aimed at addressing this problem are peer monitoring and holding coaches/managers responsible for poor team performance.

Keywords: Contract; Risk sharing; Incentives; Option contracts; Team production problem; Peer monitoring (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035339389
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