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Incentives to Quit in Men’s Professional Tennis: An Empirical Test of Tournament Theory

By Will Walker

This paper studies the influence of incentives on quitting behaviors in professional men’s tennis tournaments and offers broader implications to pay structures in the labor market. Precedent literature established that prize incentives and skill heterogeneity can impact player effort exertion. Prize incentives include prize money and indirect financial rewards (ranking points). Players may also exert less effort when there is a significant difference in skill between the match favorite and the match underdog. Results warrant three important conclusions. First, prize incentives (particularly prize money) do influence a player’s likelihood of quitting. Results on skill heterogeneity are less conclusive, though being the “match favorite” could reduce the odds of quitting. Finally, match underdogs and “unseeded” players may be especially susceptible to the influence of prize incentives when considering whether to quit.

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Advisors: Peter Arcidiacono and Grace Kim | JEL Codes: J41, J31, J32, J33, M12, M51, M52

Team Payroll Versus Performance in Professional Sports: Is Increased Spending Associated with Greater Success?

By Grant Shorin

Professional sports are a billion-dollar industry, with player salaries accounting for the largest expenditure. Comparing results between the four major North American leagues (MLB, NBA, NHL, and NFL) and examining data from 1995 through 2015, this paper seeks to answer the following question: do teams that have higher payrolls achieve greater success, as measured by their regular season, postseason, and financial performance? Multiple data visualizations highlight unique relationships across the three dimensions and between each sport, while subsequent empirical analysis supports these findings. After standardizing payroll values and using a fixed effects model to control for team-specific factors, this paper finds that higher payroll spending is associated with an increase in regular season winning percentage in all sports (but is less meaningful in the NFL), a substantial rise in the likelihood of winning the championship in the NBA and NHL, and a lower operating income in all sports.

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Advisor: Peter Arcidiacono | JEL Codes: Z2, Z20, Z23, J3

Long-Term Contracts and Predicting Performance in MLB

By Drew Goldstein

In this paper, I examine whether MLB teams are capable of using players’ past performance data to sufficiently estimate future production. The study is motivated by the recent trend by which teams have increasingly signed long-term contracts that lock in players for up to ten seasons into the future. To test this question, I define the “initial years” of a player’s career to represent a team’s available information at the time of determining whether or not to sign him. By analyzing the predictive ability these initial years have on subsequent performance statistics, I am looking to answer whether—and if so for how long—teams can justify signing players to long-term contracts with guaranteed salaries. I also compare the results of the predictive tests with actual contract data to determine the per-dollar returns on these deals for different types of contracts.
I conclude from my analysis that a player’s past performance does in fact provide sufficient insight into his future value for teams to make informed decisions at the time of signing a contract. Teams are able to better predict the future production of potential signees by examining their consistency and relative value in the initial seasons of their careers. Furthermore, the results from examining the contract data coincide with my findings on performance; teams and players arrive at salaries for long-term contracts that divide the future risk between the two parties. The returns on long-term contracts are thus demonstrated to be higher than for short-term contracts, as the overall value of longer deals compensates teams for the associated higher annual salaries.

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Advisor : Peter Arcidiacono | JEL Codes: Z2, Z22, Z23

Predicting Transfer Values in the English Premier League

By Dylan Newman

This paper examines factors that affect the transfer value of players transferred into the English Premier League from 20092015. The analysis begins by examining what factors are significant in determining a player’s projected transfer fee based on the website Transfermarkt.com as well as the actual fee that the player was sold for. The paper goes on to find that competition level and a player’s form are not statistically significant in models built to determine a player’s transfer value. Quantile regression is then used to illustrate that there is a superstar effect with a forward’s goal’s scored in the transfer market. 

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Advisor: Kent Kimbrough, Peter Arcidiacon | JEL Codes: L83, Z21 | Tagged: English Premier League, Quantile Regression, Soccer Transfer Fee

Determining NBA Free Agent Salary from Player Performance

By Joshua Rosen

NBA teams have the opportunity each offseason to sign free agents to alter their rosters. Using only regular season per game statistics, I examine the best method of calculating a player’s appropriate salary value based upon his contribution to a team’s regular season win percentage. I first determine which statistics most accurately predict team regular season win percentage, and then use regression analysis to predict the values of these metrics for individual players. Finally, relying upon predicted statistics, I assign salary values to free agents for their upcoming season on specific teams. My results advise teams to rely heavily on Player Impact Estimate (“PIE”) when predicting their teams’ win percentage, and to seek players whose appropriate salaries would be significantly more than their actual seasonlong salaries if the free agents were to sign.

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Advisor: Kent Kimbrough, Peter Arcidiacon | JEL Codes: C30, Z2, Z22 | Tagged: Free Agents, Salaries, NBA

The New Landscape of the NBA: The 2011 Collective Bargaining Agreement’s Impact on Competitive Balance and Players’ Salaries

By Nicholas Yam

The National Basketball Association (NBA) passed a new Collective Bargaining Agreement (CBA) in 2011 that introduced many changes to the structure of the league. The purpose of those changes was to improve competitive balance among the league, allowing smaller market teams to better compete with larger market teams. Many of the changes targeted the league’s salary cap and teams’ ability to pay players. This paper aims to determine whether competitive balance in the NBA improved under the 2011 CBA. The paper also determines which types of players’ salaries were affected the most. The results showed that competitive balance did not improve under the 2011 CBA. However, the results showed that higher performing players were paid proportionally more money than lower performing players following 2011 CBA.

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Advisor: Peter Arcidiacon | JEL Codes: Z2, Z20, Z22

The Impact of State and Local Government Spending on Charitable Giving in the United States

By Lynn Vandendriessche

This paper seeks to further understand how government spending impacts private giving to charitable organizations. It considers giving and spending in the United States in 2008 with a focus on government spending on education, welfare, healthcare, and hospitals. Government spending is looked at at the state and local levels. The results indicate that the impact of government spending depends not only on the category of spending, but also on the income level of the giver. Increased welfare spending is shown to cause incomplete crowding-out across all income groups. Results consistently show education spending to cause crowding-out as well. The impact of both healthcare and hospital spending is more ambiguous, with differing results for different government levels (state and local) and income brackets.

Honors Thesis

Advisor: Michelle Connolly, Peter Arcidiacon | JEL Codes: L3, L31, L38 | Tagged: Altruism/Philanthropy, and Education, Charitable Giving, Health, Non-profit Institutions, Welfare

The Impact of Greek Affiliation on Grades and Course Selection

By Andrew De Donato

We seek to understand how affiliating with a Greek organization impacts both grades and course selection. This research provides a novel addition to the literature due to a unique situation at the sample university, in that the first opportunity for freshmen to join Greek organizations occurs in the spring semester rather than the fall, as is more common. This situation allows us to control for otherwise unobserved characteristics that may be common to those who affiliate with Greek organizations. For men, joining a Greek organization is associated with a .07 point decrease in the grade received for an average class, while, for women, it is associated with an increase of .02 points in the fall semester and a decrease of .06 points in the spring semester. Joining a Greek organization is also associated with a decrease in the difficulty of selected courses, such that the average course selected provides grades that are .03 points higher than the average course, controlling for enrolled student characteristics.

Honors Thesis

Advisor: Michelle Connolly, Peter Arcidiacon | JEL Codes: I, I21, I23, I24 | Tagged: Course Selection, Fraternity, GPA, Grades, Greek, Sorority

Is the Blind Side Tackle Worth It?: An Analysis of the Salary Allocation of the NFL Offensive Line

By Kelly Froelich

The importance of the left tackle position in comparison to the other offensive line positions in the National Football League (NFL) has been widely debated amongst sports commentators, as the left tackle is traditionally the second highest paid player on a football team behind the quarterback; yet, this debate lacks empirical findings. This paper aims to quantify the impact of the individual offensive linemen on the chance of winning a game on a game‐by‐game basis and then compare the impact of the left tackle to the other offensive line positions. Using a conditional logistic regression and the marginal effects from that regression, the results do not dispute the NFL’s current trend in spending more on the left tackle in comparison to the other offensive line positions. The results show that optimal spending for the left tackle could extend to 15.976 percent of the salary cap. Thus, the possibility remains that the optimal spending for the left tackle can range up to fifteen percent of the
salary cap, seven percentage points above the next highest optimal offensive lineman spending.

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Advisor: Peter Arcidiacon | JEL Codes: J3, J31, J44 | Tagged: Football, Left Tackle, NFL, Offensive Line, Salary

Capturing a College Education’s Impact on Industry Wages Across Time: An Analysis of Academic Factors that Affect Earnings

By Ian Low

Studying how a college education can impact one’s wages has always been an area of interest amongst labor and education economists. While previous studies have stressed using single academic factors (i.e. college major choice, performance, or college prestige) to determine the effect on wages, there has not been a focus on predicting wages given industries and a combination of these academic factors across time. Therefore, the crux of my thesis seeks to provide a new model which incorporates college major choice, GPA, industry selection across time, college type (private or public), natural ability (standardized test scores), and several demographic variables in order to predict percent increase/decrease in wages. My results show that college major choice, academic performance, natural ability, and industry selection (together) do have a significant impact on earnings, and they are appropriate measures to predict post-graduation wages.

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Advisor: Peter Arcidiacon | JEL Codes: A2, A22, J3, J31 | Tagged: College, Industry, Wages

Questions?

Undergraduate Program Assistant
Jennifer Becker
dus_asst@econ.duke.edu

Director of the Honors Program
Michelle P. Connolly
michelle.connolly@duke.edu