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Incentive Contracts in Team Sports - Theory and Practice

Tina Heubeck and Jochen Scheuer
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Tina Heubeck: University of Hamburg
Jochen Scheuer: University of Hamburg

No 2002-1-1042, German Working Papers in Law and Economics from Berkeley Electronic Press

Abstract: A comparison of incentive clauses of players’ contracts in German soccer and clauses used in the NFL and NBA shows considerable differences. Against the background of principle-agent theory we have a closer look at these incentive systems. In contrast to other industries it is easy to observe the employees’ effort in team sports. Therefore, it would be desirable to set incentives for players based on their individual effort. We show that there are reasons why incentive clauses in professional German soccer, the NBA and the NFL are not directly based on effort. We argue that there are two main reasons: Firstly, efficient incentives are complementarily provided by subjective and objective performance measures. Secondly, cooperation amongst team members is essential in team sports.

Keywords: sports; labor contracts; agency theory; incentives (search for similar items in EconPapers)
JEL-codes: D62 D82 J30 K12 (search for similar items in EconPapers)
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Handle: RePEc:bep:dewple:2002-1-1042