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Rank-order tournaments, probability of winning and investing in talent: evidence from champions' league qualifying rules

Published online by Cambridge University Press:  01 January 2020

Colin Green ,
Fernando Lozano  and
Rob Simmons
Colin Green*
Affiliation:
Lancaster University
Fernando Lozano*
Affiliation:
Pomona College and IZA
Rob Simmons*
Affiliation:
Lancaster University
*
E-mail: c.p.green@lancaster.ac.uk and r.simmons@lancaster.ac.uk
E-mail: Fernando.Lozano@pomona.edu
E-mail: c.p.green@lancaster.ac.uk and r.simmons@lancaster.ac.uk
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Abstract

We analyse how a change in the probability of winning a tournament affects an agent's effort using the qualification rules for entry into the group and playoff stages of the UEFA Champions' League. Our results suggest that increasing the number of slots that a national league gets in the Champions' League leads to increases in investment in talent ex ante. This effect is largest among the teams that in the previous season just failed to qualify. This suggests that changes in prize structure leads to changes in investment decisions amongst those clubs most affected at the margin. However, we also find that incumbent teams that have already qualified for the Champions' League simultaneously raise their efforts, consistent with the occurrence of an arms race among top European football teams.

Keywords

Champions' LeaguetournamentseffortpayrollZ22
Type
Research Articles
Information
National Institute Economic Review , Volume 232 , May 2015 , pp. R30 - R40
Copyright
Copyright © 2015 National Institute of Economic and Social Research

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Footnotes

We thank Bernd Frick for supplying the transfermarkt team payroll data used in this paper and Daniel Tan for research assistance. We also thank Mike Nolan and conference participants at the 2014 Scottish Economic Society Meetings, the 2014 Work, Employment and Pensions Conference, 2014 Western Economic Association Conference and 2014 Colloquium in Personnel Economics, Cologne. We also thank two anonymous referees for comments on a previous draft.

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