| The design of the rewards structure is always crucial. The BCCI should get it right this time. |
| Last week, this column had examined research by economists on cricket and noted that much of it was focused on the toss, data from past matches and rain rules. It had also said that the fault lay not with the players but the managers of the game, namely, the Board of Cricket Control in India (BCCI). |
| The next logical step was to see what happens in the US which has a highly developed market in sports. For that reason alone, American economists (unlike their Indian counterparts) have thought it a fit subject for study. |
| Described below are four papers which may provide some ideas to our economists as to how to go help the BCCI which hopefully will examine some sensible ways of improving the domestic structure of the game. One big problem is the way in which it has designed the rewards structure. There is a winner-takes-all aspect to it which leads to poor results. |
| And if not the BCCI, at least the sponsors should commission some studies. After all, it is they who are bearing the brunt of the costs and need to look sharp. |
| Either way, it is clear that before any restructuring of domestic cricket is possible, there needs to be an effort to determine the best possible way of doing it. The design of the rewards system, amongst other things, is going to be crucial, not least because the BCCI is thinking of changing it. |
| But while a change might be warranted, it has to be done properly. Otherwise it could backfire. |
| The first two papers, in the chronological order, are by Sherwin Rosen. The first* deals with the problem of devising a reward-incentive structure that will ensure a consistent form from the players. It concludes that the final prize has to be very much bigger than the rest but this implies that there have to be prizes along the way as well, something we don't have in India, at least not in the way they should be. |
| Thus "prizes that maintain performance incentives at all stages award a constant increment for each match won up to the last stage; and an amount greater than this for the player who wins the final match... and it is only the difference between winning and losing prizes in the finals that controls incentives there." The BCCI may kindly note. |
| The second paper** is about how to get only the best to survive while the weaker ones are eliminated. In Indian cricket we assume that this always happens but in fact because of politics, that is rarely the case. The best get left out while the weaker ones make it. This is what Greg Chappell seems to have complained about. However, Indian cricket has ensured one thing, namely, "those who have succeeded in attaining higher ranks rest on their laurels and slack off in their attempts to climb higher." |
| The third paper*** is by Sherwin Rosen and Allen Sanderson and it examines the labour market in sports with special reference to the "struggle for control of those markets between interest groups" such as even betting syndicates. Clearly, India is not unique. |
| The authors also discuss other aspects that are clearly recognisable in Indian cricket, namely, excess incentives, negative externalities and inefficiencies, restrictive agreements, and salary caps. They say that these features "redistribute rents from players to owners" "" in our case the BCCI. In the end, these devises punish success, say the authors. |
| The last paper**** by Richard B Freeman and Alexander M Gelber examines the link between the distribution of rewards and of information about skill on the one hand, with performance on the other. They find that performance varies with the distribution of rewards in an inverse-U way. That is, when performance is best when there is a reasonable difference between the top reward and the lowest, and performance tends to be worse if all rewards are similar, or even if there is a huge disparity between rewards. |
| *The Distribution of Prizes in a Match-Play Tournament with Single Eliminations, http://www.nber.org/papers/w1516 **Prizes and Incentives in Elimination Tournaments, http://www.nber.org/papers/w1668 Sherwin Rosen ***Labor Markets in Professional Sports, http://www.nber.org/papers/w7573 ****Optimal Inequality/Optimal Incentives: Evidence from a Tournament, http://www.nber.org/papers/w12588 |
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