Exploring the Incentive Structure of NASCAR Events

The existing literature on the incentive structure of NASCAR events has focused on the apparent "NASCAR Exception," which refers to the relative flatness of the finishing order monetary payouts in NASCAR events compared to other sporting events. This apparent exception to standard tournament theory is motivated as a result of the high penalty for accidents in racing events compared to other tournament events such as professional golf, where the first place finisher often receives a payout that is many times larger than lower finishers. In this paper, we develop a game theory model that suggests a flat monetary award structure with bonus points and contingency awards yields the same aggressive driving behavior as a simple disproportionate monetary award structure. The degree of steepness of the monetary award structure does not matter by itself. We use empirical data from NASCAR races over the last three decades to test the implications of the model and find no statistical evidence of a flat monetary award structure impacting driving behavior.