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Although most labor and microeconomic textbooks contain a theoretical discussion of the backward‐bending labor supply curve, scant empirical evidence of this phenomenon exists. In this paper we investigate the behavior of PGA golf professionals as they make labor‐leisure choices for performing on the PGA Tour. Using tournament theory to model this labor market and data from tournament performances over three seperate years, we find significant evidence that higher paid PGA Tour players do indeed operate in the backward‐bending region of their labor supply curves.

Analysis of management compensation has focused on the principal — agent problem. We address the problem confronting owners who must choose a manager without knowing the productivity of individual managers. We find performance contingent contracts may result in a separating equilibrium in which high productivity managers accept contracts low productivity managers find unacceptable.