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The Superstar Effect

2008 January 28
by Phil Miller

A given tournament player is often thought to put forth more effort when he/she faces better competition. But what if there is a superstar in the tournament (HT to Don Coffin)? Do the non-superstars continue to put forth as much effort?

Managers use internal competition to motivate worker effort, yet I present a simple economic model suggesting that the benefits of competition depend critically on
workers’’ relative abilities,— large differences in skill may reduce competitors’’ efforts.
This paper uses panel data from professional golfers and finds that the presence of a
superstar in a rank-order tournament is associated with lower competitor performance.
On average, higher-skill PGA golfers’ ’tournament scores are 0.8 strokes higher when
Tiger Woods participates, relative to when Woods is absent. Lower-skill players’ ’scores
appear unaffected by the superstar’’s presence. The adverse superstar effect increases
during Woods’s streaks and disappears during Woods’’s slumps. There is no evidence
that reduced performance is due to “riskier ”play.

That is from Jennifer Brown’s job market paper entitled “Quitters Never Win: The (Adverse)
Incentive Effects of Competing with Superstars.” Here is a Slate write up on Brown’s paper. Here’s the conclusion in the Slate piece (by Joel Waldfogel):

What does this mean for the nongolfing world? It’s generally agreed that people work harder when they are paid for performance. Anyone who has ever languished in a Paris cafe, €”where service compris translates roughly as “the Republic of France mandates a minimum 15 percent tip regardless of service quality” €”can appreciate the power of incentives. But the effects of incentives appear to be muted when the incentives are based on relative performance and the competition is tough. We’re taught that quitters never win, but if the evidence from golf is any indication, it might be more accurate, if less pithy, to say that expected losers are more likely to quit, or at least not perform as well. If you’re running a business, and you have the opportunity to hire the Tiger Woods of office work, you’re not going to pass up the chance. But Brown’s study suggests you might want to consider its effect on your other workers’ performance. Steak knives might not cut it as second prize.

Here is a link to Sherwin Rosen’s 1983 American Economist article on the economics of superstars. Economists have known for a long time that the amount of effort put forth depends on its benefits and the costs. Brown’s paper, according to the abstract, shows us empirical evidence that the lower the probability of succeeding, the less effort non-superstars put forth (all else equal).

I have three quick thoughts: how often are there superstars in tournaments? If superstars rarely come around, then it might make no sense to alter the structure of tournament play.

What if there are two superstars in the tournament? Then the battle among the non-superstars becomes for third place and, all else equal, this should lead to even less effort being put forth.

What about the situation where the superstar is very young and looks to dominate the sport for years to come? It seems reasonable that some with potential talent but who have not invested in that sport may decide to look elsewhere to compete.

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