Tournament performance and “Agency” problems: An empirical investigation of “March madness”

Tournaments have long been used as a resource allocation device. Regardless of the margin of victory, a tournament’s champion is typically rewarded far more handsomely than are its losers. For this reason, a tournament can generally be expected to elicit spectacular levels of performance from a group of competitors; performances in professional golf tournaments are an example. Surprisingly, the analysis in this paper indicates the existence of no significant relationship between the rewards and performances of participants in the NCAA basketball tournament. To explain this finding we allude to the classic principal-agent problem.