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Testing Coase theorem: the case of free agency in NBA

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  • Ming-Jen Lin
  • Chia-Chi Chang

Abstract

This study seeks to test the applicability of the Coase theorem to the allocation of players within. According to the Coase theorem, a player's final allocation would be the same no matter who has ownership of his playing rights if there are no transaction costs. What ownership affects is just the allocation of wealth. Using data from the National Basketball Association (NBA), this article argues that player mobility is likely to be affected by player ownership due to transaction cost imposed by the institution. It is also concluded that performance indicators used for value estimation vary by position and that this also affects player transfer.

Suggested Citation

  • Ming-Jen Lin & Chia-Chi Chang, 2011. "Testing Coase theorem: the case of free agency in NBA," Applied Economics, Taylor & Francis Journals, vol. 43(20), pages 2545-2558.
    • Handle: RePEc:taf:applec:v:43:y:2011:i:20:p:2545-2558
    DOI: 10.1080/00036840903299722
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    Cited by:

    1. Steven G. Medema, 2020. "The Coase Theorem at Sixty," Journal of Economic Literature, American Economic Association, vol. 58(4), pages 1045-1128, December.
    2. Fort, Rodney & Maxcy, Joel & Diehl, Mark, 2016. "Uncertainty by regulation: Rottenberg׳s invariance principle," Research in Economics, Elsevier, vol. 70(3), pages 454-467.
    3. Philip L. Hersch & Jodi E. Pelkowski, 2014. "Does General Manager Networking Affect Choice of Trade Partners in Major League Baseball?," Journal of Sports Economics, , vol. 15(6), pages 601-616, December.

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