Barbara Arel and Michael J. Tomas III

In this paper, we develop a modified salary scale for NBA rookies that adjusts player financial incentives to enter the draft early. Our proposed “ratcheting” salary schedule pays different salary amounts depending on draft pick and the number of years the player delayed entry to the draft to alter the financial incentives of declaring early. We analyze this proposed new salary scale using a put option analogy to determine early exercise boundary positions in which there is no value in the option to delay entry into the draft. The results show that under a ratchet salary system the...Read more

Tiffany Greer
Joshua A. Price
and David J. Berri

Each year the National Basketball Association (NBA) drafts a small number of college players from a very large pool of potential college talents. This purpose of this study is to explore how NBA decision-makers decide which players are in the group of selected players. The reported results confirm—as prior studies have indicated—that points scored dominates the evaluation of playing talent. In addition, evidence also suggests that decision makers have trouble separating the player from the college team that employs the player. more