The Burden of Glory: Competing for Non-monetary Incentives in Rank-order Tournaments

Transcription

1 The Burden of Glory: Competing for Non-monetary Incentives in Rank-order Tournaments Suggested running head: The Burden of Glory RAJA KALI Department of Economics. Sam M. Walton College of Business. University of Arkansas Henry Angus Building, Fayetteville, AR DAVID PASTORIZA* (corresponding author) Department of International Business. HEC Montréal. Chemin de la Cote-Sainte-Catherine, Montréal, Canada. H3T 2AT JEAN-FRANÇOIS PLANTE Department of Decision Sciences. HEC Montréal. Chemin de la Cote-Sainte-Catherine, Montréal, Canada. H3T 2AT

2 The Burden of Glory: Competing for Non-monetary Incentives in Rank-order Tournaments Abstract In an environment in which elite, highly-paid professionals compete for non-monetary rewards, we find evidence of underperformance. Our analysis suggests that choking under pressure from high-stakes non-monetary rewards is behind the underperformance. This implies that high stakes non-monetary rewards can create meaningful pressure on individuals and lead to worse performance, a distinct issue that has yet to be adequately examined. These findings come from an examination of the behavior of top US golfers competing to earn a place on the US Ryder Cup team via their performance in PGA Tour tournaments with differing allocations of Ryder Cup qualifying points. Keywords: Competition, non-monetary incentives, high stakes, choking, performance, risk-taking, intimidation

3 The Burden of Glory: Competing for Non-monetary Incentives in Rank-order Tournaments Abstract: In an environment in which elite, highly-paid professionals compete for nonmonetary rewards, we find evidence of underperformance. Our analysis suggests that choking under pressure from high-stakes non-monetary rewards is behind the underperformance. This implies that high stakes non-monetary rewards can create meaningful pressure on individuals and lead to worse performance, a distinct issue that has yet to be adequately examined. These findings come from an examination of the behavior of top US golfers competing to earn a place on the US Ryder Cup team via their performance in PGA Tour tournaments with differing allocations of Ryder Cup qualifying points. 1. Introduction What is the impact of high-stakes non-monetary incentives on job performance? This is an important question given how widely used non-monetary incentives are in the business world 1. A growing body of academic literature has begun to consider this question 2. A primary focus of this literature has been on the role of non-monetary incentives in principalagent problems. At the risk of generalizing, one could say that the conclusion of the literature thus far, both theoretical and empirical, is that non-monetary rewards can provide 1 Non-monetary incentives are widely used in firms. It is common practice in various organizations to reward top-performing employees with symbolic rewards such as medals, rings, sculptures and plaques, often during lavish ceremonies. Kosfeld and Neckermann (2011) provide examples of such awards from McDonalds and IBM. 2 Heffetz and Frank (2011), Gneezy et al., (2011), and Ellingsen and Johanesson (2007) are valuable surveys of the literature in these areas. The idea that humans value status has been widely studied (see, for example, Frank (1985)). We reference specific papers later. 3

4 effective incentives, and in some cases may be better than financial incentives at aligning objectives of agents and principals. In this paper, we examine an environment in which individuals compete for a highpowered non-monetary reward associated with status and social esteem, and find evidence that runs contrary to existing empirical literature on non-monetary incentives, albeit in a setting that is entrepreneurial rather than agency. We find that elite, highly-paid professionals who compete for glory underperform, and that underperformance intensifies as pressure increases. While prior research (Ariely et. al., 2009) has found that highpowered monetary incentives can result in a decrease in performance, our finding that such choking under pressure can happen with non-monetary incentives is novel, to the best of our knowledge. Empirical work on the question of non-monetary incentives has been primarily experimental, in large part because of the difficulty in finding a real-world setting with a convincing separation of monetary and non-monetary incentives. What distinguishes our study is an attempt to examine the importance of non-monetary incentives in a competitive environment with high stakes, high-ability, and wealthy agents: the PGA tour. Since we cannot distinguish between the effects of status, social esteem and respect (and indeed multiple non-monetary mechanisms could be at work), we therefore bundle them together under the term glory. Specifically, we use data from the PGA Tour to examine the performance of US players between 1996 and 2012 when competing to qualify for the Ryder Cup. 4

5 The Ryder Cup is the oldest competition of nations in professional golf, involving the two golf superpowers: the US and Europe. Players are not paid to participate in the Ryder Cup and there is no monetary award for winning the Ryder Cup. Moreover, players who qualify for the USA Ryder Cup team must make a donation to a charitable foundation. This biennial competition is widely acknowledged to be the most prestigious competition of nations in golf. Playing for one s country is a great honor for which even very wealthy professional golfers vie (Palmer and Dodson, 1999; Rosaforte, 1996). Being part of an elite group of golfers who have the privilege of representing their countries, and not a direct monetary gain, is considered the Ryder Cup s own reward. We use the contest to qualify for the Ryder Cup to provide a separation of monetary and non-monetary incentives. The Ryder Cup qualifying point system allocates a number of points to each PGA Tour tournament. It is designed in such a way that throughout the qualifying Ryder Cup period (typically two years), two editions of the same PGA Tour tournament have a different endowment of Ryder Cup points. One year (the year previous to the Ryder Cup) in which there are few Ryder points and another year (the year of the Ryder Cup) in which there are many Ryder points while all other aspects of the tournament are similar. Our identification strategy is based on comparing the performance of players across the same tournament in two subsequent years. By focusing on blocks of the PGA Tour tournament with similar economic incentives (i.e., prize money awarded), but different glory incentives (i.e., available Ryder Cup points), we can measure the effect of the latter. The main results of our paper are as follows. First, the higher the number of Ryder Cup points at stake is, the worse players play. In other words, we find significant evidence that the desire to attain glory is a burden for player performance. Second, we find evidence 5

6 that as the time to qualify runs out and competitive crowding intensifies, players feel more pressure and tend to underperform. Third, we find that Ryder Cup points have negative effects on both players with and without previous Ryder Cup participation. Thus, adverse effects are present not only among players who try to attain glory for the first time, but also among those who try to retain it. Fourth, we find no evidence that players who are not competing to qualify for the US Ryder Cup team (e.g., low-ability 3 players) are negatively affected in PGA Tour tournaments with a higher allocation Ryder Cup points. Our results are thus robust to an out-of-sample test. Fifth, we eliminate the possibility that player underperformance is due to the adoption of risky strategies. We find that when players find themselves in tournaments with a high allocation of Ryder Cup points, they become risk averse and adopt safe strategies. Sixth, we show that off-the-course income (e.g., corporate endorsements), is not sensitive to qualifying for the Ryder Cup. Thus, player underperformance is unlikely to be driven by pressure from the expectation of future monetary rewards, as in Ariely et al., (2009). Finally, we find that even the wealthiest players in the PGA Tour (i.e., those who earn very high off-the-course incomes) underperform when trying to qualify for the Ryder Cup. The remainder of the paper is structured as follows. Section 2 motivates our study in the context of the literature on non-monetary incentives and choking under pressure. Section 3 describes the Ryder Cup and the way in which American players qualify to represent the US, which sets the stage for our empirical strategy described in Section 4. Section 5 contains our primary results. In section 6 we conduct a series of robustness 3 Although we use the term low-ability, all golfers in the PGA Tour have extraordinary golf skills. 6

7 checks. In section 7 we consider alternative explanations for the behavior of players to qualify for the US Ryder Cup Team. Section 8 discusses our results and concludes. 2. Non-Monetary Incentives and Performance Most empirical research on non-monetary incentives has taken the form of laboratory experiments. In pioneering work, Ball and Eckel (1996, 1998) and Ball et al., (2001) directly manipulate status in the lab by artificially awarding high or low status to subjects. They find that their manipulation affects behavior and those individuals awarded high status in the lab enjoy favorable economic outcomes. Ashraf et al., (2014) conduct a field experiment to examine the effectiveness of financial and non-financial rewards for prosocial tasks. They find that agents who are awarded non-financial rewards exert more effort than those offered financial rewards. Non-financial rewards elicit effort by facilitating social comparisons among agents and by leveraging the agents pro-social motivation. Kosfeld and Neckermann (2011) also study the impact of status and social recognition on worker performance in a field experiment and find that purely symbolic awards significantly improve performance 4. The theoretical literature on non-monetary incentives is similarly aligned. Ellingsen and Johanesson (2008) expand the theoretical framework initiated by Benabou and Tirole (2003, 2006) to explain why a desire for social esteem can lead to greater effort, especially when an actor deems the esteem accorded by an audience s approval to be worthwhile. The notion of social esteem or respect in these studies reflects the idea that individuals care about what others think and is based on self-regarding motives such as pride and shame. 4 Kamenica (2012) provides a valuable survey of this literature. 7

8 Besley and Ghatak (2008) develop a model showing how the explicit creation of status incentives by firms can increase effort by creating what they call motivated agents. According to these authors, status is associated with the awarding of a positional good such as a non-monetary honor (a prize or a title) that only individuals who have produced high output receive. Status incentives work by creating social divisions. Our notion of glory is closest in spirit to the Besley-Ghatak notion of a non-monetary positional good such as an honor. Given the prior literature on non-monetary incentives there is therefore no reason to expect anything other than positive performance effects. To this extent, our finding that competing for high-stakes non-monetary incentives can be associated with poorer performance (i.e., choking under pressure 5 ) can be considered unexpected and novel. One could ask what mechanisms explain the negative relationship between nonmonetary incentives and performance. While a detailed exploration of these mechanisms is beyond the scope of this study, the psychology literature addresses two plausible complementary explanations (Beilock and Carr, 2005; Camerer et al., 2005; De Caro et al., 2011). First, distraction occurs when a distracting context shifts attentional focus to taskirrelevant cues, such as worries about the situation and its consequences. That is, a golfer who is in contention to qualify for the Ryder Cup may occupy his mind with thoughts about how his life would be if he qualified for the Ryder Cup team, distracting him from the task at hand. Second, explicit monitoring suggests that pressure raises self-consciousness, which causes individuals, involuntarily, to think about the task. The individual shifts behavior 5 Social psychologists define choking as performing more poorly than expected given one s level of skill (Beilock and Carr, 2005). 8

9 from automatic to controlled mental processes that can disrupt well-learned and automated tasks. That is, a golfer who is in contention to qualify for the Ryder cup, may start to monitor the way he swings the golf club in an effort to enhance his performance, resulting in poorer performance. The source of both these mechanisms is situational stress or pressure, which in our context comes from the glory that is associated with qualifying for the Ryder Cup. From this perspective, our study examines the question of whether large non-monetary rewards can create enough pressure to lead to worse performance, a distinct issue that has yet to be adequately examined. Our findings are particularly interesting when contrasted with previous empirical studies that have used data on professional golf to study the incentive effects of tournaments. For example, Ehrenberg and Bognanno (1990a & 1990b) find that tournaments with higher prize money lead to better performance and that players facing larger marginal returns increase their performance more. According to these studies, highability players (precisely those trying to qualify for the Ryder Cup) are particularly responsive to the monetary reward structure of a tournament. Our study is not the first to document the phenomenon of choking. This phenomenon has been studied by experimental psychologists and behavioral economists, who have explored the various reasons for skill failure (Kamenica, 2012). Some of these studies look at how circumstances that are inherently stressful may degrade performance. For instance, Genakos and Pagliero (2012) find that contenders in weightlifting contests systematically underperform when ranked closer to the top. Apesteguia and Palacios-Huerta (2010) find that soccer players underperform under the pressure of penalty shoot-outs. Beilock and Carr (2005) find that individuals high in intellectual capacity underperform when trying to 9

10 resolve math problems under time pressure. Beilock, et al., (2008) find that skilled individuals underperform when trying to perform biomechanical tasks under time pressure. However, to the best of our knowledge, our study is the first to provide evidence of the existence of choking when individuals are explicitly competing for a high-stakes nonmonetary reward in a real-world setting. 3. Qualifying for the Ryder Cup The Ryder Cup is a biennial tournament whose origins date to It is jointly administered by the PGA of America and the PGA European Tour, the site of which alternates between courses in the US and Europe. The halo of prestige surrounding the Ryder Cup derives not only from being the oldest competition of nations in professional golf and including most of the best professional golfers in the world, but also from the fact that no prize money is awarded for winning it. By comparison, a regular PGA Tour tournament has an average purse of over $6 million. In order to further detach the Ryder Cup from the commercial interests of sponsors, players are only allowed to wear the Ryder Cup logo on their clothing. Moreover, players who have qualified for the Ryder Cup must make a donation to a charitable foundation. An illustration of how American players vie for qualifying for the US Ryder Cup Team can be found in a quote from Arnold Palmer, 62-time PGA Tour winner: I loved the Ryder Cup, because it simply wasn t about playing for money. It was about playing for something far grander and more personal than income and money lists. It was all about playing for your country, your people, and therefore yourself (Palmer and Dodson, 1999). 10

11 While representing one s country is an honor that American players strive for, we acknowledge that different subsets of players who vary in their perception of the benefits of being part of the US Ryder Cup team. In particular, the motivation of players who are trying to attain glory for the first time may differ somewhat from that of players who are trying to retain glory by qualifying again. Players who try to qualify for the first time may perceive that they would benefit from being considered by the media and public as part of a distinctive status group. Also, they will have the chance of developing a bond with and enjoy the benefits of camaraderie with established superstar players. On the other hand, players who qualified in the past and try to qualify again may be motivated to not lose status benefits. In golf parlance, a player achieves stardom not only with the number of regular and major tournament victories, but also with the number of Ryder Cup participations he accumulates 6. The costs of participating in the Ryder Cup are relatively minor when compared to its benefits. First, the risk of an injury during the Ryder Cup, while possible, is low. Contrary to other sports, a golf tournament does not demand strenuous effort; golf injuries are mainly due to overuse and they are uncommon compared to other sports (McHardy et al., 2006). No player was injured during any of the Ryder Cup editions that are included in this study. Second, there is an emotional cost associated with losing the Ryder Cup and the team can be berated in the press (Crouse, 2014). Third, there are relatively minor opportunity costs, since during the week when the Ryder Cup is held, either there is no tournament in the PGA Tour or there is a tournament referred to as the alternate event, which is a low- 6 The glory of participating in the Ryder Cup is such that in several instances previous Ryder Cup team members who did not qualify, volunteered to be assistants to the captain and thus live the Ryder experience again (Sobel, 2010). 11

12 prestige and poorly endowed tournament. Fourth, players must donate $100,000 to a charitable donation of their choice (PGA Media Guide, 2012). While this is a significant contribution, it is relatively small when compared to the average on-the-course incomes that US Ryder Cup players earned per season on the PGA Tour (e.g., $5,103,000 in 2012). In sum, the benefits of participating in the Ryder Cup largely overshadow the costs, as evinced by the fact that all American players who have qualified for the US Ryder Cup Team since 1996 have accepted the invitation to participate. Despite the large non-monetary rewards and the absence of direct monetary rewards for participating in the Ryder Cup, we acknowledge that in principle there may be indirect monetary rewards associated with being in the US Ryder Cup team. Today, the Ryder Cup generates great media attention with almost 1000 accredited TV reporters and staff from across the world (Ryder Cup, 2014) in attendance. Players may improve their brand, through their appearance in the US Ryder Cup team, which could in turn result in improved contracts with their sponsors. In section 7.3 we consider this possibility in more detail and show evidence that qualifying for the Ryder Cup does not affect future off-the-course income. It is worth noting that our study does not focus on player performance during the Ryder Cup 7. Rather, it focuses on players performance during the PGA Tour season, when they try to qualify for the Ryder Cup team. US players are selected for the team based on 7 Several reasons prevented us from analyzing players performance during the Ryder Cup. First, the contest takes place over three days and includes 28 single and team matches. Team matches make it difficult to estimate an individual player s performance. Second, the captain of the team can decide which players are in good physical and psychological condition and get to play. Third, the format of play has changed multiple times over the history of the Ryder Cup. Fourth, there is almost no data on players behavior during the Ryder Cup; only final results are available. 12

13 their performance during the PGA Tour season. Each PGA Tour tournament is assigned a number of Ryder Cup qualifying points. When the qualifying period ends, the players who have accumulated the most Ryder Cup points are selected for the team. Our empirical strategy (described in the next section) allows us to isolate the effect of Ryder Cup points available per tournament on each player s behavior. The PGA Tour season consists of 45 to 49 tournaments, depending on the year. Between 1996 and 2012, the PGA Tour season starts in January and generally ends in November. For most tournaments, players have the right but not the obligation to participate. A player can decide to skip a tournament for among other reasons, because he considers the prize money is not large enough. Tournaments consist of four rounds and each round of 18 holes. The four rounds are played over four consecutive days. Most tournaments are made up of a field of approximately 150 players. After the second round, roughly half the field with the best scores (i.e., lowest cumulative strokes) make the cut and advance to the final two rounds. Players who make the cut receive a fraction of the total prize money based on a convex function that does not vary across tournaments. 4. Data and Empirical Strategy 4.1. Sample Our study analyzes the qualifying periods of eight Ryder Cups, between 1996 and During this period, four Ryder Cups were held in the US (1999, 2004, 2008 and 2012) and 8 Prior to 1996 there are issues of data availability: First, it is not possible to clearly identify the Ryder Cup qualifying point system for the US team. Second, the public records of the Official World Golf Ranking are not available in a digital format. As explained on page 14, without these rankings it is not possible to identify the players who are in contention to qualify for the Ryder. Third, risk-taking variables, which we will use in robustness checks are not available in PGA Tour dataset ShotLink. 13

14 four in Europe (1997, 2002, 2006 and 2010). In total, our study includes 17 PGA Tour seasons. We test player behavior during the PGA Tour regular season with the ShotLink dataset obtained directly from the PGA Tour. For every tournament of each season, the PGA Tour gathers information about every shot of every player. This information is recorded thanks to laser technology that measures the coordinates of the ball before and after each shot. We use a panel dataset including 703 tournaments and 3,306 players. The Ryder Cup qualifying point system has varied slightly since the 1996 edition (see Appendix Ryder Cup Qualifying Points System - US Team). The system has several distinctive characteristics: First, the qualifying points allocated to the PGA Tour tournaments that take place in a Ryder Cup year (i.e., 1997, 1999, , 2004, 2006, 2008, 2010 and 2012) are much higher than the points allocated to the PGA Tour tournaments that take place in the year previous to the Ryder Cup (i.e., 1996, 1998, 2000, 2003, 2005, 2007, 2009 and 2011). Specifically, approximately 80% of the total points are allocated to PGA Tour tournaments held in the Ryder Cup year 10. Hence, the point system incentivizes players to exert greater effort in the tournaments held during the Ryder Cup year than in the previous year. Second, four major championships during the season (Augusta Masters, US Open, British Open and PGA Championship) are rewarded with extra Ryder Cup points. Third, during the qualifying period of the 1997, 1999, 2002, 2004 and 2006 Ryder Cups, players accumulated points based on their finishing position in PGA Tour tournaments (only the first ten positions were rewarded). During the qualifying period of 9 Because of the September 11 th events, the Ryder Cup scheduled for 2001 was rescheduled to The points allocated in 2002 counted for the 2004 Ryder Cup. 10 Over the years, there has been changes in the percentage of points allocated to the Ryder years vis-à-vis non-ryder years, as well as an inflation of the total number of points. The relative measure of Ryder Cup points, described in section 4.3, accounts for both of these changes by focusing on the relative importance of a given tournament on a Ryder year vis-à-vis non-ryder year. 14

15 the 2008, 2010 and 2012 Ryder Cups, players accumulated Ryder points based on a combination of finishing position and prize money earned in PGA Tour tournaments. Fourth, Team USA is composed of 12 players, but some notable exceptions (known as captain s picks 11 ) do not qualify through Ryder Cup points. The captain is a senior golfer who does not play but coordinates the team. The captain s picks are often players who did not accumulate enough Ryder points but whom the captain feels could be helpful (e.g., bringing group cohesiveness). And fifth, since the Ryder Cup is always held in the fall of the Ryder year, the qualifying period typically ends with the The PGA Championship tournament, which is held in mid-august. 12 Only a subset of the players in the PGA Tour are truly in contention to qualify for the US Ryder Cup team. In order to focus only on players who have a credible chance of qualifying, we restrict our sample to US players who have been among the top 20 US players in the Official World Golf Ranking (OWGR) for at least one week during the qualifying period of each Ryder Cup. The reasons for this sample selection criterion are the following: First, from 1996 to 2012, there has only been one player who qualified for the Ryder who did not meet this criterion. Second, a player needs to perform reliably well to get into the top 20 US players in the OWGR (i.e., one PGA Tour win is not enough to get a player in that OWGR position). Third, including more players in our sample would 11 In the Ryder Cups prior to 2008, there were two captain picks (ten players qualified through points). In the Ryder Cup of 2008, 2010 and 2012, there were four captain picks (eight players qualified through points). 12 Exceptionally, in 1999 the Sprint International tournament was considered in the Ryder qualifying period even though it took place one week after the PGA Championship. 15

16 increase the noise in our model, since we would include players with very little chance of qualifying for the US Ryder Cup team. Our final sample includes 111 players Dependent Variable Performance: Performance is captured by the total number of strokes at the end of the tournament. The higher the number of strokes, the worse is the performance. The winner of the tournament is the player who finishes with the lowest cumulative number of strokes Main Explanatory Variables Ryder Cup points: This variable is derived from the total number of Ryder points available per tournament. Our empirical model (see section 5.1 for details) takes advantage of the fact that the same tournament is played twice during the Ryder qualifying period. We consider these groups of two tournaments as blocks, and represent the Ryder points variable as a proportion of the points available in that block that are allocated at a given tournament. For instance, if 300 points are available in a 1996 tournament and 600 points in the 1997 edition of the same tournament, then the Ryder Points variable is in 1996 and in Measuring points as a proportion implicitly controls for the inflation in points over the years 14. Time: This variable is a percentage that reflects, on a weekly basis, the proportion of Ryder Cup points that have already been allocated with respect to the total number of Ryder points available during a qualifying period. As the proportion of Ryder points already allocated 13 The year-by-year breakdown is: 37 players (Ryder Cup of 1997), 34 players (1999), 41 players (2002), 45 players (2004), 34 players (2006), 45 players (2008), 41 players (2010) and 36 players (2012). 14 Note that for the 2004 and 2006 Ryder Cup editions, the proportions are taken over the three years of the qualifying period. 16

17 increases, the opportunity to earn Ryder points decreases. The points already allocated are a more accurate measure of time than a calendar date to capture how much of the contest is left, since Ryder points are not allocated linearly through calendar time (i.e., the year previous to the Ryder Cup is endowed with few points). Competitive crowding from below: Bothner et al., (2007) found that the number of competitors capable of surpassing a given player in a tournament predisposes that player to risk taking. Following a similar logic, we build a measure of crowding by lower-ranked competitors as follows. Before the start of PGA Tour tournament t, for each player i, we compute the pairwise distances between player i s current Ryder Cup total points and that of each player trailing him. We then calculate the number of trailing players who could catch player i in tournament t if they obtain the maximum number of Ryder Cup points while player i earns no points. A tournament with more points means that more players will be in a position to catch up to player i. In sum, competitive crowding from below captures the number of lower-ranked players capable of overtaking player iin the Ryder Cup ranking at tournament t. Since this information is available before each tournament, it captures players perception of the risk of losing rank positions. Competitive crowding is calculated based on all US players competing in the PGA Tour, not only on the highability players that are used to fit our model (i.e., top 20 US players in the OWGR) Controls Players compete on the PGA Tour for several years in tournaments that often take place on the same golf courses. The models we fit are designed to take advantage of these characteristics. Every pair of tournaments within a Ryder qualifying period is given a fixed 17

18 effect that accounts for the specificity of that pair of tournaments, enabling comparisons of situations that are highly similar, except for their contribution towards Ryder Cup qualification. This natural blocked design is key to capturing the Ryder effect. Even a change over time (e.g., improving technologies) is accounted for by these parameters since each block spans only two years (exceptionally, in the Ryder Cups 2004 and 2006 the span is three years). The 1996 and 1997 PGA Championship tournaments, for instance, have a common baseline which is different from the 2011 and 2012 PGA Championship tournaments. Similarly, we added a fixed effect for every player to capture each individual s skill level. While the model can accommodate many of the differences between tournaments and players, we included some additional control variables that vary over time and can capture differences at a finer level than those captured by the fixed effects alone. Career money: A player s wealth may influence the level of motivation to qualify for a tournament that is not endowed with direct monetary incentives but with strong nonmonetary incentives. We control for players personal wealth by calculating the on-thecourse money they have accumulated on the PGA Tour (going back as early as 1983 to account for earnings that took place before the studied period). Career money is updated on a weekly basis and is not adjusted for inflation. Competitiveness of the field of players in a tournament: Boudreau et al., (2016) find that individual performance in a contest is negatively affected by an increase in the number of high-ability players. We calculate the competitiveness of each tournament using the 18

19 formula provided by the OWGR 15. The competitiveness of the field in a tournament increases with the number of high-ability contestants. Logarithm of the total prize money: It reflects the economic incentive of each tournament. Ehrenberg and Bognanno (1990a; 1990b) show a positive influence of the tournament purse on player performance. We include the logarithm of the total purse in thousands of dollars deflated by the monthly consumer price index. Golf course difficulty: The length and altitude of the golf course are used as proxies of course difficulty. Long golf courses may favor long hitters over short hitters. In low altitude there is more pressure and thus the ball flies less. Weather: For each tournament, we control for the average rain (inches), average temperature (Fahrenheit) and average wind (miles per hour), taken over the four rounds of the tournament. Rain makes the golf course more receptive and forgiving, inducing players to take risks. In cold weather the ball flies less, eventually leading to shorter shots and worse performances. On windy days, longer shots are more difficult to control, leading to shorter shots and worse performances. Week of the tournament: Professional golfers plan their season to reach certain tournaments when their performance is at its peak. If the same tournament is held at different times in two consecutive years, it could be argued that this explains the performance difference of a player in the Ryder vs. the non-ryder year. Accordingly, we control for the week in which each tournament is held. 15 An explanation of a tournament s competitiveness index is provided at: 19

20 5. Ryder Cup Points and Player Performance 5.1. Model To measure the Ryder effect, we fit models using a Generalized Estimating Equations (GEE) approach (Liang and Zeger, 1986). The data used are at the tournament level, which means that every line will summarize the results of tournament t for player i. For the performance variable total strokes, we fit the following model: TotStrks it = β 1 Ryder t + β 2 Crowd it + β 3 Time it + β 4 Distance it + + α 1 log(totmoney t ) + α 2 Competitiveness t + α 3 AveWind t + α 4 AveTemp t + α 5 AvePrec t + α 6 CarreerMoney it + α 7 altitude t + α 8 length t + γ i + τ g(t) + ε it As discussed in Section 4.1, the data feature a special design by which the same tournament is repeated two years in a row with a different number of Ryder points available. 16 Capturing this blocking effect is important to singling out the Ryder effect, which is why we attribute a common intercept τ g(t) to each such block of tournaments. To be more specific, g(t) is an index for τ that takes the same value for the two occurrences of a given tournament within the same Ryder qualifying period. The number of blocks is reported in each table of results. For illustration purposes, if there are 267 blocks, then g(t) ranges from 1 to 267. To account for individual discrepancies in skills, we attribute a fixed effect (γ i ) to every player. That is, each player has a different baseline performance, noted γ 1 to 16 Note that for the 2004 and 2006 Ryder Cup editions, the same tournament is played three times rather than two. 20

21 γ 111, that plays the role of an individual intercept. This is also why there is no global intercept (β 0 ) in the model. The data are in a panel and every player has repeated measurements. The error term (ε it ) must capture this reality and model the correlation between the error terms for a player s consecutive tournaments. The error term is based on an AR(1) process where the errors of two consecutive tournaments for the same players have correlation ρ. The empirical estimate of the standard error (sandwich estimate) is known to be robust to a misspecification of the correlation structure and the choice of an AR(1) structure should capture the appropriate correlation. The models were fitted using PROC GENMOD in SAS 9.4. All explanatory variables are standardized to allow for informal comparisons of the magnitude of their coefficients. To reduce multicollinearity between the interaction term and its main effect components, the components were standardized prior to multiplication (Smith and Sasaki, 1979) Results Summary statistics are reported in Table 1. Table 2 reports results using players ranked among the 20 best US players in the OWGR for at least one week during each Ryder Cup qualifying period. Models 1 and 4 indicate that the Ryder Cup points per tournament have a detrimental effect on players performance. The higher the Ryder Cup points at stake, the higher the number of total strokes (i.e., the worse players perform). The magnitude of the Ryder Cup point coefficient is sizable. For instance, players scored 0.37 strokes higher in regular tournaments during the 2006 Ryder Cup year than in regular tournaments of the previous non-ryder year (i.e., 2005). The magnitude of this effect is substantial, especially 21

22 when we consider that an average of two (and as many as eight) players can be tied in the first position at the end of the first round of a PGA Tour tournament (Brown, 2011). [Insert Tables 1 and 2 about here] Four results in Table 2 provide additional evidence on the negative influence of the Ryder Cup on player performance. First, models 2, 4, 5, 6 and 7 indicate that when competitive crowding intensifies (i.e., there is a higher number of competitors capable of surpassing a given player in the Ryder ranking), player s total strokes per tournament increase. Second, models 5 and 7 show significant evidence indicating that as the time goes by (i.e., there is an increasing number of Ryder points already allocated and, consequently, a decreasing number of Ryder Cup points available for the qualifying period), players play worse. Third, models 5 and 7 show that the interaction between time and Ryder points has a negative effect on player performance. That is, the negative effect of Ryder points intensifies as the amount of Ryder points available for the qualifying period decreases. Fourth, models 6 and 7 indicate that the interaction effect between time and competitive crowding is positive and significant. That is, when many Ryder points have already been allocated and competitive crowding intensifies, players play worse. As a whole, these results indicate that competing to qualify for the US Ryder Cup team has a detrimental effect on players performance 17. In the next sections, we explore the robustness of our findings and consider alternative explanations for underperformance. 17 The objective of our study and the design of our empirical models are not intended to establish a comparison between monetary and non-monetary incentives. However, we see the value of providing the magnitude of total prize money per tournament: If the same tournament increases its total prize money by 10% from one year (non-ryder year) to the next (Ryder year), then a player performs 0.07 lower total strokes in the latter tournament. 22

23 6. Robustness Checks 6.1. Players With and Without Previous Ryder Cup Participations One could argue that the adverse incentive effect of trying to qualify for the Ryder Cup is driven by those players who have never been part of the team. After the first qualification, a player may perceive that he has already became part of the history of the Ryder Cup, and thus the pressure may vanish as he tries to qualify in subsequent Ryder Cup editions. In this robustness check, we verify whether the adverse performance effect is suffered both by players with and without previous Ryder Cup participation. First, we run a model where we include both players who never qualified for the Ryder Cup and players who qualified for the Ryder Cup, but only until the point at which they qualified for the first time. Thus, models in Table 3 capture the effect of attaining glory; that is, trying to qualify for the first time for the Ryder Cup team. Second, we run a model for players who have qualified for the Ryder Cup, but only including their performance after their first Ryder participation. Thus, models in Table 4 capture the effect of retaining glory; that is, trying to qualify again for the Ryder Cup team. Results indicate that both players with and without previous Ryder participations underperform when trying to qualify for the Ryder. However, coefficients on tables 4 reveal that the negative effect of trying to qualify for the Ryder Cup is smaller for players who have already qualified once and try to qualify again. One possible interpretation of this finding is that pressure associated with trying to attain glory for the first time is higher than the pressure associated with trying to retain glory. Another possible interpretation is 23

24 that players who have already qualified in the past are the best players not only because they perform better, but also because they are more capable of handling pressure. [Insert Tables 3 and 4 about here] 6.2. Out-of-sample Test Only a subset of players on the PGA Tour is truly competing to qualify for the Ryder team. So far, our analysis has focused on those players who have a real chance of qualifying (i.e., US players who have been among the top 20 US players in the OWGR for at least one week during each Ryder Cup qualifying period). However, there is a subset of low-ability players (i.e., low ranked in the OWGR) playing on the PGA Tour who have very little chance of qualifying for the US Ryder Cup team. In this robustness check, we test whether the performance of these low-ability players is also adversely affected when playing in a PGA Tour tournament with high Ryder points. Since these players are not competing to qualify for the Ryder, their performance should not be affected. In Table 5 we run alternative models for players who never reached the top 50 and top 100 positions in the OWGR during a Ryder qualification. There has never been a player who qualified for the US Ryder Cup team who had not reached the top 50 of the OWGR during the qualifying period. As shown in the left-hand side and center of Table 5, results confirm that the Ryder points available in a tournament do not exert a significant negative influence on low-ranked players, contrary to what happens with highly-ranked players. [Insert Table 5 about here] In an additional out-of-sample test, we focus on elite players who are not eligible for the Ryder Cup. More specifically, we examine whether highly-ranked European players 24

25 who compete on the PGA Tour but are not eligible to earn Ryder points, are subject to the negative influence of Ryder points. Between 1996 and 2004, European players participating in the PGA Tour could earn money but not points to qualify for the European Ryder Cup team. 18 Consequently, during the 1997, 1999, 2002 and 2004 Ryder Cups, there was a subset of highly-ranked European players who were not eligible to earn Ryder points when they participated in the PGA Tour tournaments, and therefore they should not suffer from underperformance. The results, displayed on the right-hand side of Table 5, show no significant evidence that tournaments with a higher allocation of Ryder points made these players underperform, contrary to the case for highly-ranked US players Final Rank Position as Dependent Variable In this robustness check, we test whether our results hold using a different measure of players performance. The dependent variable, instead of total strokes, is players final rank position in the tournament. Players who end a tournament in the top rank positions earn more Ryder points than those who end in the last rank positions. Accordingly, Ryder points may have an effect on players final rank position in a tournament. It is important to note that final rank position in a tournament is a less accurate measure of performance when compared to total strokes, for several reasons. First, the final rank position of a player in a tournament depends directly on the quality of the field of players with whom he is competing. Second, a player s standing in the final rank of the tournament not only depends on his own performance, but also on how he performed 18 In an effort to retain the best European players in Europe, the European Tour did not consider their performance in PGA Tour tournaments in determining whether they qualified for the European Ryder Cup team. Since 2005, this rule no longer applies. 25

26 relative to other players. Third, at the end of a golf tournament players are often crammed within a very short margin of strokes, which implies that numerous players can be tied in the same rank position. In the case there are numerous ties, rank does not reflect accurately the performance of a player. For instance, a player can finish two tournaments in rank #3. It can be that while in the first tournament he stood alone at #3, in the second tournament he shared rank #3 with five other players. Despite these disadvantages, table 6 below confirms that Ryder Cup points available in a tournament can have an adverse effect on a player s performance, also when measured as final rank position in the tournament. [Insert Table 6 about here] 7. Alternative Explanations to Underperformance under Pressure Risk Taking Previous empirical research has shown that when competition is tight, contenders adopt risky strategies (Bothner et al., 2007; Brown and Li, 2010). The underperformance of players as they try to qualify for the Ryder team may be due to the fact that they take more risks due to the tightness of the qualifying contest. Indeed, a thorough look at our data revealed that players are crammed in a short margin of Ryder points as they get closer to the end of the qualifying period, such that there can be a significant number of players swinging between interim qualified and interim not qualified. An excellent performance in two consecutive tournaments towards the end of the qualifying period can make a player who is trailing slightly behind the interim qualified to earn a spot on the 26

27 Ryder team 19. This tightness in competition could induce players to take more risks in order to advance rank or avoid losing rank. By taking more risks, golfers may increase the variance of their performance (Brown, 2011). Thus, underperformance may be driven by risk-taking strategies rather than choking under pressure. To rule out this possibility, we test whether golfers take more risks when trying to qualify for the Ryder Measures of Risk Taking In golf, like in many other contests, competing players have to choose not only the amount of effort they exert, but also the riskiness of their actions (Brown and Li, 2010). Golfers can take different types of risky decisions depending on where the ball lies on the golf course. In this study, we use two different measures of risk taking: the first measure is called going for it and is associated with risk taking in long shots (Brown, 2011); the second measure is called risky putts and is associated with risk taking in short shots (Pope and Schweitzer, 2011). These risk measures are described below. Going for it: Each of a golf course s 18 holes consists of a tee box as the starting point, a putting green containing the hole and serving as the end point, and a fairway, the area between the tee box and the putting green. Depending on the length of the fairway, a hole can be categorized as par-3 (i.e., holes in which the player generally lands the ball in the putting green in 1 shot), par-4 (i.e., holes in which the player generally lands the ball in the putting green in 2 shots) or par-5 (i.e., holes in which the player generally lands the in the ball in the putting green in 3 shots). The remaining two shots for each of these hole types 19 For the sake of illustration, in the 2010 Ryder Cup the last interim qualified player could have been surpassed by 15 players if any of them won the last tournament of the qualifying period (i.e., PGA Championship) and he did not earn any Ryder points. 27

28 are the number normally required to sink the ball in the hole. The first type of risk decision is the one a player takes on the tee box or the fairway, and it concerns how far he has to shoot to land the ball on the putting green. In some par-4 holes, 20 some players try to reach the green in 1 shot (rather than 2 shots), and in some par-5 holes, 21 some players try to reach the green in 2 shots (rather than 3 shots). Whenever a player faces a going for it hole, he must choose between going for it and not going for it. Going for it necessarily means a longer shot. In golf, like in many other sports, there is a trade-off between long distance and accuracy. If a player takes the risk and hits a long shot that ends close to the hole, this will typically lead him to a better score. However, the hole is often obstructed by water and sand hazards. Not hitting the green may mean that the player ends up in an undesirable location, leading to a more difficult next shot and, consequently, a worse score. From 2002, the ShotLink data specifies which holes are going for it holes and whether each player went for it or not. Our measure of going for it is a fraction of the number of attempts at going for it divided by the number of such opportunities in a given tournament. Risky putt: The second type of risk decision is made on the putting green. A player can make a risky putt by hitting the ball too strong and pushing the ball past the hole. An aggressive putt increases the probability of making the first putt; however, if the hole is missed, the ball will pass the hole by a lot and the subsequent putt will be more difficult. By contrast, hitting the ball lightly decreases the probability of making the putt, but it also 20 The PGA Tour categorizes a par-4 hole as a going for it hole if at least 10% of the field land their first shot in the putting green or around the putting green. 21 The PGA Tour categorizes all par-5 holes as going for it holes. 28