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Contests, Grand Prizes, and the Hot Hand

2009; SAGE Publishing; Volume: 10; Issue: 3 Linguagem: Inglês

10.1177/1527002508326683

1552-7794

Todd A. McFall, Charles R. Knoeber, Walter N. Thurman,

Gambling Behavior and Treatments

Awarding a grand prize to the player who wins most often in a series of contests links the contests together and makes incentives in the current contest depend on past performance. A lucky player who wins early faces relatively stronger economic incentives to exert effort because of his early success. As a consequence, early winners are more likely to keep winning through the middle of the series. That is, a grand prize generates what looks like a hot hand. Indeed, this argument about economic incentives may help to rationalize the inconsistent evidence of a hot hand in sporting events. This article develops this argument and assesses it empirically using data from the Professional Golfers' Association Tour, before and after a grand prize, the season-ending Tour Championship, was introduced.