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Losing to Win: Tournament Incentives in the National Basketball Association

  • Beck A. Taylor

    (Baylor University)

  • Justin G. Trogdon

    (Duke University)

The focus of tournament models has been rank-order compensation schemes whereby participants receive higher payments for higher relative performance, either incrementally or winner-takes-all. Our research focuses on a unique tournament that offers rewards for both winning and losing, specifically the National Basketball Association's regularly scheduled season of games. We examine three NBA seasons to determine whether team performance responded to changes in the underlying tournament incentives provided by the NBA's introduction and restructuring of the lottery system to determine draft order. Our results yield strong evidence that NBA teams are more likely to lose when incentives to lose are present.

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File URL: http://dx.doi.org/10.1086/323930
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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 20 (2002)
Issue (Month): 1 (January)
Pages: 23-41

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Handle: RePEc:ucp:jlabec:v:20:y:2002:i:1:p:23-41
Contact details of provider: Web page: http://www.journals.uchicago.edu/JOLE/

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  1. James McClure & Lee Spector, 1997. "Tournament performance and “Agency” problems: An empirical investigation of “March madness”," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 21(1), pages 61-68, March.
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  5. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Knoeber, Charles R, 1989. "A Real Game of Chicken: Contracts, Tournaments, and the Production of Broilers," Journal of Law, Economics and Organization, Oxford University Press, vol. 5(2), pages 271-92, Fall.
  7. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June.
  8. Drago, Robert & Heywood, John S., 1991. "Subject response to loss in an experimental tournament," Economics Letters, Elsevier, vol. 36(4), pages 371-374, August.
  9. Ronald G. Ehrenberg & Michael L. Bognanno, 1988. "Do Tournaments Have Incentive Effects?," NBER Working Papers 2638, National Bureau of Economic Research, Inc.
  10. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  11. Christopher Ferrall & Anthony A. Smith, Jr., . "A Sequential Game Model of Sports Championship Series: Theory and Estimation," GSIA Working Papers 1997-38, Carnegie Mellon University, Tepper School of Business.
  12. Dye, Ronald A, 1984. "The Trouble with Tournaments," Economic Inquiry, Western Economic Association International, vol. 22(1), pages 147-49, January.
  13. Christopher Ferrall, 1996. "Promotions and Incentives in Partnerships: Evidence from Major U.S. Law Firms," Canadian Journal of Economics, Canadian Economics Association, vol. 29(4), pages 811-27, November.
  14. Main, Brian G M & O'Reilly, Charles A, III & Wade, James, 1993. "Top Executive Pay: Tournament or Teamwork?," Journal of Labor Economics, University of Chicago Press, vol. 11(4), pages 606-28, October.
  15. Knoeber, Charles R & Thurman, Walter N, 1994. "Testing the Theory of Tournaments: An Empirical Analysis of Broiler Production," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 155-79, April.
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