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Are Sunk Costs Irrelevant? Evidence From Playing Time In The National Basketball Association

Author

Listed:
  • Daniel M. Leeds
  • Michael A. Leeds
  • Akira Motomura

Abstract

type="main" xml:id="ecin12190-abs-0001"> We use playing time in the National Basketball Association to investigate whether sunk costs affect decision making. Behavioral economics implies that teams favor players chosen in the lottery and first round of the draft because of the greater financial and psychic commitment to them. Neoclassical economics implies that only current performance matters. We build on previous work in two ways. First, we better capture potential playing time by accounting for time lost to injuries or suspension. Second, we use regression discontinuity to capture changes when a player's draft position crosses thresholds. We find that teams allocate no more time to highly drafted players. ( JEL L83, J23, D03)

Suggested Citation

  • Daniel M. Leeds & Michael A. Leeds & Akira Motomura, 2015. "Are Sunk Costs Irrelevant? Evidence From Playing Time In The National Basketball Association," Economic Inquiry, Western Economic Association International, vol. 53(2), pages 1305-1316, April.
  • Handle: RePEc:bla:ecinqu:v:53:y:2015:i:2:p:1305-1316
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    File URL: http://hdl.handle.net/10.1111/ecin.2015.53.issue-2
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    Cited by:

    1. Quinn Keefer, 2015. "Performance Feedback Does Not Eliminate the Sunk-Cost Fallacy: Evidence From Professional Football," Journal of Labor Research, Springer, vol. 36(4), pages 409-426, December.

    More about this item

    JEL classification:

    • 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

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