Are Sunk Costs Irrelevant? Evidence from Playing Time in the National Basketball Association
AbstractThe relevance of sunk costs in decision making is one of the major sources of disagreement between neoclassical economists and behavioral economists. We test the importance of sunk costs by examining the role of a player's draft position on his playing time in the National Basketball Association. Specifically, we ask whether players taken as "lottery picks" or in the first round of the draft are treated differently from otherwise identical players who are chosen later. We build on previous studies in three ways. First, we study a time period that had a stronger contrast between the financial commitment to first and second-round draft picks. Second, we use a better measure of playing time by accounting fully for the time a player loses to injury, suspension, or other exogenous factor. Finally and most importantly, we use a more sophisticated methodology – regression discontinuity – to test for whether teams treat lottery picks or first-round picks differently from later picks. Our results find little or no impact of draft round or lottery status on playing time. Hence, our findings strongly support the neoclassical outlook.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7801.
Length: 44 pages
Date of creation: Dec 2013
Date of revision:
Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Other versions of this item:
- Daniel Leeds & Michael A. Leeds & Akira Motomura, 2013. "Are Sunk Costs Irrelevant? Evidence from Playing Time in the National Basketball Association," DETU Working Papers, Department of Economics, Temple University 1304, Department of Economics, Temple University.
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-12-15 (All new papers)
- NEP-CBE-2013-12-15 (Cognitive & Behavioural Economics)
- NEP-EXP-2013-12-15 (Experimental Economics)
- NEP-LMA-2013-12-15 (Labor Markets - Supply, Demand, & Wages)
- NEP-SPO-2013-12-15 (Sports & Economics)
You can help add them by filling out this form.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Are NBA coaches behavioral or neoclassical?
by Economic Logician in Economic Logic on 2014-01-17 15:45:00
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).
If references are entirely missing, you can add them using this form.