Contest Incentives, Effort Levels and Betting Markets in European Football

Abstract

Tournament theory (Lazear and Rosen, 1981) predicts that effort supplied in contests varies with the incentive structure. Previous research finds that outcomes in individual and team sports events reflect variable effort supply by contestants. We develop evidence that a market-based measure of expected outcomes in contests, betting odds, also reflect variable effort supply. Empirical analysis of more than 40,000 regular season football matches in 10 top domestic European leagues shows that betting odds on matches reflect variation in incentives to supply effort generated by the structure of the league, in terms of the promotion and relegation structure and qualification for pan-European competitions, and the specific position of the teams on the league table.