Unbiased Analysis of Today's Healthcare Issues

Incentivizing wins: A basketball digression

Written By: Jason Shafrin - Apr• 10•10

Although this blog deals mostly with topic related to health economics, today I will digress to another one of my passions basketball.  This post deals with an issue of incentives: Do all basketball teams have an incentive to win games?

As we are now nearing the end of the NBA regular season, the Toronto Raptors and the Chicago Bulls are fighting for the last playoff seat in the Eastern Conference.  Fifteen other playoff contenders are jockeying for playoff seeding.  Philadelphia 76ers fans, however, are praying for losses.  The following comes from a discussion of an upcoming 76ers-Bucks game from the blog of hard-core 76ers fans:

The Sixers need a loss in the worst way. A win pretty much destroys all hopes at a top 6 pick, and puts the 7th in jeopardy as well. The Sixers must, lose, out.

Because the 76ers have been eliminated from playoff contention they  have little incentive to win games.  In fact, they have an incentive to lose as many games as possible since the more losses they have, the higher their draft pick will be.  The NBA instituted a lottery system whereby the top 3 picks are determined randomly among the non-playoff contenders.   The odds of getting these top 3 picks, however, increase with the number of losses each team has.  Additionally, the NBA orders all remaining picks outside the top 3 from worst to best record.  Thus, teams like the 76ers still have an incentive to lose games.

A better system would be to hand out draft picks based on each team’s record after 60 games.  After about three-quarters of the games have been played, the best and worst teams will have generally separated from each other.  By calculating draft picks based on the record only after a certain share of the games, teams will not have an incentive to lose games on purpose.  Even if the players try as hard as they can (which is not certain), teams are still able to lose games by resting marginally injured stars, or giving more playing time to lesser quality players.

Although this system does not incentivize teams to win, at least it does not incentivize them to lose.  Plus, by winning more games at the end of the season, teams may be able to attract more fans.  The teams who will be hurt are those that played well over the first 60 games only to falter over the last 22.  Also teams with unusually difficult schedules in the first 60 games would be hurt.  However, it is worth punishes these few teams to improve the overall play at the end of the season.

One could even add a mini-playoff among the teams with the 10 worst records in the NBA.  Among these 10 bad teams, the team with the best record over the remaining 22 games should be able to increase their draft pick by one spot.  This would encourage the worst teams to still try to win without unnecessarily rewarding teams still in the playoff hunt with an improved draft pick.

To summarize:

  • Base draft picks on each team’s record after 60 games.
  • Among the teams with the 10 worst records after 60 games, increase the draft position by one slot for the team with the best winning percentage over the remaining 22 games.

If the NBA implements my strategy, fans like those in Philadelphia will experience a more exciting brand of basketball at the season’s end.

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One Comment

  1. J M Rao says:

    There is a paper about this in the journal of labor economics, by Taylor and Trogdon (2002 I think). They found that teams do tank, but I believe they do so less since the lottery was setup. They introduced the lotto in the early 1980’s after the Houston Rockets clearly tanked to be able to draft Hakeem Olajuwon with the 1st pick.

    I think your idea is good. The worst teams will still have incentive to tank pretty much all year because if you start 3-15 you know well you have no chance of making the playoffs. But most teams have an outside shot of making the playoffs until about game 60, especially in the Eastern Conference.

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