Tiger Woods and the backward bending supply curve of labour

Tiger Woods was in the news recently with the ending of his relationship with the apparel company ‘Nike’ which was worth $660m over three decades. Has he signed a deal with another company? We will find out what Woods will sport in the Genesis Invitational at Riviera Country Club in February and throughout the rest of 2024.

As with any elite athlete there comes a time when the value of endorsements / sponsorship etc and accumulated past income allows them to achieve greater utility levels without working. This concept refers to the income and substitution effect and the backward bending supply curve of labour. Economic theory assumes that there is a positive relationship between labour supply and the wage rate. So, as the wage rate increases, more people are willing to work. This is represented by the individual’s labour supply curve, which mainly slopes upwards. Beyond a certain point, individuals will take the view that they prefer leisure to work. This point is indicated by the backward-sloping curve from point S’. Before this point, an individual worker is more willing to supply his or her labour as the wage rate increases. It must be stressed that this point depends on the individual’s attitude to work and leisure – point S’ on any individual’s supply curve will vary (see graph above).

Therefore professional athletes who reach a certain level of performance, whether it be in golf, tennis, cycling etc tend not to take part in so many events because of their increase in wealth. Appearance money, endorsements as well as prize money mean the income effect increases as the athlete can, in theory, achieve greater utility levels without performing. This may be more prevalent as the athlete enters the latter stages of his/her career. So with Tiger Woods appearing next at Genesis Invitational at Riviera Country Club in February what company will he be endorsing and how many tournaments will he play in 2024?

Source: The Economics of Sport – Leeds, von Allmen and Matheson (2018)

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