The Incentive Effects of Tournaments: The PGA Australasian Tour 1991

Abstract

This paper examines the relationship betlveen the structure of tournament incentives and individual performance. Although it follows recent research on Professional Golf Association tournaments in the United States and Europe, it concentrates on the PGA Australasian Tour in 1991 for which financial incentives on average are much less attractive than for tourna1nents in the northern hemisphere. The results strongly confirm that tournan1ents do have an incentive effect. The incentive effects that such tournament-type reward structures are clearly shown to have may be applicable not only to professional sport hut also to industrial wage structures. Tournament models can offer a different perspective on the extent to which pay influences performance at the firm level.