| The widespread principal-agent problem in labor relationships shows,workers have incentives to engage in opportunistic behavior under guaranteed salary and information asymmetry.This issue in professional sports has received more and more attention in recent years.Many scholars have investigated the incentive mechanism of long-term contract and its impact on player performance.From a new perspective of big contract,we innovatively propose to utilize the design of quasi-experiment and Difference-in-Differences(DD)estimation based on Mahalanobis Distance Matching to empirically examine the influence of contract-related incentives on player performance---the contract year effect and the big contract effect,using a detailed dataset of 5415 observations from 809 players during season 2004--05 and 2014--15.We find that,players before signing a new contract purposely improve individual performance,although insignificant,to secure a more lucrative contract,while they tend to shirk once they get a big contract,thus lowering performance significantly.Regressions on grouped sample show that,star players with annual salary above 10 million dollars are less likely to shirk compared to ordinary ones,evidenced by smaller decline in performance.Further analyses support the negative relationship between remaining years and individual performance,which is,incentives to shirk gradually decline over the duration of contract.Besides,the degree of players'reduced effort is associated with longer length of contract.Therefore,we conclude big contracts do exert strong incentive effects on professional athletes,inducing them to vary effort strategically before and after signing a contract to maximize expected utility. |
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