How Does Prize Money Work in Tennis?

Answer the following questions to check your understanding of the story.

Why is winner’s prize money almost double that of the runner-up?

a) to award the player who is the better athlete

b) to encourage sufficient effort from both players

c) to encourage entry by more tennis players

d) to compensate for greater preparation costs incurred by the winner

Wrong! - Don’t the two athletes who reach the final have similar athletic skill and similar preparation costs? More tennis players may try to enter the tournament but do tournament sponsors necessarily want low-seeded players?

Well Done! - Tournament sponsors want to maximize profit. The large difference in prize money encourages both players in the finals match to play hard enough to win, and hard-fought contests have more spectators and generate more revenue for the tournament sponsors.

How does the Lorenz cure for professional tennis athletes compare with the Lorenz curve for non-athletes?

The Lorenz curve for professional tennis athletes ____________ Lorenz curve for non-athletes.

a) is above the line of equality unlike the

b) is below the line of equality unlike the

c) lies much further from the line of equality than the

d) lies much closer to the line of equality than the

Wrong! - When is the Lorenz curve closer to the line of equality—when the distribution of income is more or less equal? Is the income distribution of professional tennis athletes more or less equal than that of non-athletes? Can a Lorenz cure lie above the line of equality?

Good Job! - In professional tennis, the few athletes who win the major championships earn exponentially more than the hundreds of lower-seeded players, so the distribution of income among professional tennis athletes is much less equally distributed than among non- athletes. The Lorenz curve for professional tennis athletes lies further from the line of equality than the Lorenz curve for non-athletes.

How does the Gini ratio of professional tennis athletes compare with the Lorenz curve of non-athletes?

The Gini ratio of professional tennis athletes is ___________.

a) lower than that of non-athletes

b) equal to 1 and the Gini ratio of non-athletes equals 0

c) higher than that of non-athletes

d) equal to the Gini ratio of non-athletes

Wrong! - What is the Gini ratio? What does the Gini ratio tell us about income inequality?

That's Right! - The Gini ratio is the ratio of the area between the line of equality and the Lorenz curve to the entire area beneath the line of equality. The Lorenz curve for professional athletes lies much farther from the line of equality, so the Gini ratio of professional tennis athletes is higher than that of non-athletes.

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