The effect of an agent’s expertise on National Football League contract structure

There is extensive theoretical research focusing on the ways in which principal–agent interactions vary depending on the agent’s expertise or knowledge. While the empirical research testing the implications of thesemodels involves a broad array of experts ranging from lawyers to physicians to real estate agents, we are not aware of any empirical research that focuses on how the level of an agent’s expertise affects outcomes. This paper contributes to the empirical research on delegation to experts by considering agents representing football players in contract negotiations with National Football League (NFL) teams. Using whether and for how long an agent is certified with the NFL Players’ Association as a proxy for expertise, we find that the monetary terms of the contract do not vary with an agent’s expertise, conditional on the contract structure. However, we do find that an agent’s expertise does affect the contract structure – specifically, contract duration and incentive clauses. These results suggest that while minimal expertise is required to understand the appropriate monetary compensation associated with a given contract structure, expertise is required to fully grasp the tradeoffs when negotiating the contract structure. © 2013 Elsevier B.V. All rights reserved.