Skills, Effort, and Performance in Tournaments: A Dynamic Model and Empirical Analysis

We develop a dynamic model of skill acquisition and performance in a tournament setting. Comparative statics suggest how the distribution of performance may change in response to changes in total and relative compensation. The model is explored empirically by examining trends in professional golf earnings distributions. The empirical work indicates that the performance of lesser skilled professional golfers has improved relative to higher skilled golfers in periods of rising real purses and increases in purse spreads that favor the better golfers. We argue that increased investment in acquired skills across the skill distribution can lead to relative performance gains by the lesser skilled players because their marginal product of acquired skill exceeds that of the better players.