The Superstar Effect and Its Influence on Within- and Between-Team Effort Provision: The Case of Professional Hockey

The effect of between-team heterogeneity on the teams’ incentives to exert effort is known to be negative. However, the role of within-team heterogeneity for its overall performance stays ambiguous. This paper studies how these two sources of heterogeneity affect the effort provision in teams. Using the data on the last 6 regular seasons of the National Hockey League (NHL), we assess, both theoretically and empirically, how the presence of a superstar(s) in a team affects its probability of winning that is directly related to the effort exerted. Running reduced form tests, we find that only the effect of strategic absence of a superstar in the away team is significant. We also construct a maximum likelihood estimator and recover the skill profiles of top and bottom NHL teams. Based on them, we perform policy experiments and show that on average, all NHL teams are better off having homogeneous rosters in the long-term perspective. However, they can still benefit from having superstars in the short-term perspective.