Novak Djokovic’s recent U.S. Open title extended his record for career tennis grand slam victories to 24. He follows Roger Federer and Rafael Nadal, who broke this record with totals of 20 and 22. These achievements illustrate some economics of superstars and competitions.
The career dominance of these stars runs counter to expectations for a mature sport. Tennis stars have earned fame and fortune for decades. Top athletes whose skills suit tennis should all be playing, producing competitive balance.
By contrast, suppose tennis was only played in England. The top 20 players would come from a small sample of world athletes and may only include one true superstar talent. After a sport goes worldwide, the top 20 players could all be superstar talents.
Coaching and training should also close the gap. With no coaching, the players with naturally perfect swings will dominate. Technology can now detail the perfect swing, grip, and footwork, which can be taught to all top players.
Training and nutrition help top players maintain peak performance longer, helping stars win additional majors later in their careers. But this increases the number of stars playing at a high level, offsetting the career effect. Also, the big pries attracting top athletes to the sport might lead some stars to retire early to enjoy their money instead of maintaining intense training.
The structure of tennis tournaments advantages top players relative to golf. Tennis tournaments involve matches between two players. Superstars need not be better than every other competitor each day; they only need to be better than that day’s opponent.
By contrast, the low score over four rounds wins a golf tournament. A top golfer who shoots the course record on Friday might well win the tournament. After a tennis player’s perfect quarterfinal match, their semi-final match begins all even.
Tennis tournaments also advantage intimidating stars. A golfer can win a tournament without ever being paired with the top superstar. Djokovic wins a tournament unless some player across the net beats him. The structure of tournaments has been the same for decades, so the elements favoring tennis cannot explain the recent career grand slam records.
Both tennis and golf exhibit what economists call superstar markets, where talent is rewarded differently than in most labor markets. Labor market compensation normally depends on the value workers produce for businesses, called the marginal value product. It equals the worker’s contribution to production (the marginal product of labor) multiplied by the price of the good the worker makes. All labor market employment is voluntary, and businesses are not charities. Workers must create $20 per hour of value to be paid this amount. Competition for workers bids wages up to the marginal value product.
A worker who is 10 percent more productive than another normally makes 10 percent more. But in sports – and especially tennis and golf – enormous earnings differences exist between the top players and “average” pros. For example, the 2023 top PGA golf money earner made seven times more than the 51st-ranked earner ($21 million vs. $3 million). The top earner is not seven times better than any PGA tour professional.
What gives? As economist Sherwin Rosen first showed, sometimes relative productivity matters more than absolute productivity. In sports, victory goes to the better competitor, and many rewards go to the winners. The margin between victory or defeat is often small and the players delivering that extra performance can make a lot more.
Superstar effects refer generally to markets where relative performance matters and are observed outside of sports, especially in entertainment, law, and CEOs in business. When people want the best lawyer or best CEO, bidding can skew compensation significantly.
Are enormous differences in compensation and fame based on small differences in performance fair? I have merely explained and not justified superstar effects. But the star system emerges from voluntary exchanges in the market and ultimately reflects our preferences. And young athletes train very hard in pursuit of superstardom.
Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision. The opinions expressed in this column are the author’s and do not necessarily reflect the views of Troy University.
