Incentive pay and decision quality: evidence from NCAA football coaches

ABSTRACT

Using play-by-play American football data and panel data on head coach remuneration, we test whether a head coach’s incentive pay affects the quality of their decisions. We proceed by first estimating an ‘optimal strategy’ for first-down offensive plays, then investigate whether the gap between actual and optimal choices is affected by incentive pay. In contrast to merely looking at the outcome of an agent’s choice, our approach considers the decision environment and the resources available. We find a small, but significant, negative effect of incentive pay on decision quality. Critically, this effect is not found when looking at raw outcome measures.

KEYWORDS:

• Incentive pay
• sports
• decision quality
• semiparametric estimation
• panel data

JEL CLASSIFICATION:

• J33
• C23

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ The National Collegiate Athletic Association (NCAA) is a nonprofit organisation which serves as both the organiser and governing body of intercollegiate athletics in the United States.

² More than 99% of head coaches have some form of on-field performance related bonus stipulated in their contract.

³ A drive is the terminology used for a series of plays for the offense before possession is given to the opposing team.

⁴ We are only able to consider players as being available if they are playing in the given game and also appear in our restricted sample at some point (not necessarily in that particular game).

⁵ We use data only up to 2013 since we do not have remuneration data past this point.

⁶ This helps capture the wealth of the team and controls for its impact on performance through assistant coaches.

Additional information

Funding

Financial support from the Aarhus University Research Fund [AUFF-26852] is gratefully acknowledged.