The Incentive to Lose in the NBA

Posted on April 12, 2007 by

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This past Monday the Sports Law Blog asked the question: Why does tanking occur in the NBA but seemingly not in other leagues?

The question basically presumes that the NBA’s losers will intentionally lose games towards the end of a season to enhance their draft position. What people wonder is why we don’t see similar behavior in other sports.

Before I offer my two cents, let me ask and answer (or at least try and answer) a few related questions.

1. Do NBA teams actually engage in this behavior?

This is what we said in The Wages of Wins:

Beck Taylor and Justin Trogdon [in an article published in 2002 in The Journal of Labor Economics] wondered how the incentive to lose altered the behavior of NBA teams. During the 1983–84 season, the year before the lottery was established, these authors­ found that teams eliminated from the playoffs were, relative to playoff teams, about 2.5 times more likely to lose. This result was uncovered after they controlled for team quality. In other words, non-playoff teams were found to lose more often than one would expect even bad teams to fail. When the lottery was instituted the next season, though, the increased tendency of non-playoff teams to lose vanished.

That is not the end of the story. In 1990 the NBA instituted a weighted lottery, where the odds of landing the top pick would improve the more the team lost. Once again, teams in the NBA had an incentive to lose. Once again Taylor and Trogdon report that after controlling for team quality, non-playoff teams were more likely to lose, although the size of the effect was smaller. With a weighted lottery non-playoff teams were only 2.2 times more likely to lose. Hence, as the incentives these teams faced were changed, the behavior changed as well.

So the work of Taylor and Trogdon offers pretty clear evidence that NBA teams did in the past lose games in an effort to improve their draft position. In other words, the basic premise of the Sports Law Blog seems to be on pretty solid ground.

2. How do NBA teams improve on their ability to lose?

I don’t think a team could go to its players and ask them not to try hard. For one thing, it’s possible that this behavior is technically illegal. At least, I don’t think you are legally allowed to throw a sporting contest. Certainly such behavior would make league authorities – if they could absolutely prove it was happening (and apparently regression results are not considered proof) – very unhappy. Consequently, if a player was asked to do this and he later confessed, the team’s decision-makers could be in trouble. So asking the players to throw the games is probably not a good idea.

The way to do this is to do what the Clippers and Grizzlies did last year when each needed to lose to enhance their playoff positioning. You don’t ask your players not to try, you simply don’t play your best players. And that action can be taken for supposedly legitimate reasons. Often coaches will say “We need to see how the young players perform so we can know what we are going to do for next season.” Of course, a side benefit of letting the young players perform is more losses and a greater chance at securing a better draft choice.

3. Why do NBA teams do this?

In The Wages of Wins we note the key motivation. Often the difference between the first player taken and the next is quite large. A good example is the difference between Tim Duncan and Keith Van Horn. Duncan was the first choice in the 1997 and he is on pace to have 194.2 career wins before the end of this season. Van Horn was the second pick and produced 34.4 wins before exiting the league in 2006. In sum, Duncan is one of the greatest players of all time and Van Horn, well, was not.

For a more recent example, consider LeBron James and Carmelo Anthony. This season LeBron is on pace to produce 17.1 wins and has a Wins Produced per 48 minutes [WP48] of 0.256. If we look at his first four seasons we see a player that has been paid $18.8 million and produced 65.6 wins. In sum, LeBron is really good.

In contrast, Carmelo Anthony has a WP48 of 0.084 this season (average is 0.100) and is on pace to produce about 4.1 wins. Across his first four seasons he has been paid $15.1 million but only produced 11.5 wins. In sum, Carmelo is no LeBron.

If the Nuggets had the first pick in 2003 and took LeBron, they would have seen more than 50 additional wins for only $3.7 million more in salary. Given this difference, we can see why the NBA’s losers need to keep losing.

It’s not good enough to be bad. To have the best chance at the very best talent, you have to be really bad. And if you fail to get that top choice – because you failed to be really, really bad – you can end up with a talent that really doesn’t help you very much at all.

This is essentially the point I tried to make in an NPR interview I gave to John Moe (which was broadcast on March 31st). In this interview I argued that it would be somewhat irresponsible for a team to try and win every game down the stretch of a losing season when this action reduces the likelihood a team would succeed in the long-run.

4. Should the NBA allow this behavior?

The problem for the NBA is that teams know it’s very likely Greg Oden and Kevin Durant can dramatically alter their fortunes next year. So teams have an incentive to do what they can to improve the chance that these particular talents will be acquired.

To stop this behavior, the NBA went to a lottery system in the mid 1980s. As Taylor and Trogdon noted, when the lottery was not weighted, this practice of losing to win vanished. Only when the weighted lottery was introduced did this behavior return.

Clearly the NBA can stop this behavior by re-introducing the non-weighted lottery.

And given that losing to win undermines the integrity of the game, a non-weighted lottery should be re-instated. Asking NBA teams to ignore their incentives is not a policy that is likely to work. In other words, NBA teams do not have a clear incentive to take action that hurts their team but might help the image of the league.

Basically the NBA should heed the primary lesson economics teaches — people respond to their incentives. If you want behavior to change you have to change the incentives people face.

5. Why do football and baseball teams not engage in this behavior?

First of all, I have not seen a study that establishes that football teams and baseball teams do not do this. Still, I did watch my Detroit Lions blow the first pick in the NFL draft by defeating the Dallas Cowboys on the last day of the 2006 NFL season. So I suspect NFL teams do not lose games in an effort to secure a better draft choice (at least if they do, someone forgot to tell the Lions).

There are a few reasons NFL teams do not do this. First of all, predicting performance in football is difficult. We are pretty sure that Greg Oden is going to be a good NBA player. As the Lions have found with Joey Harrington and Charles Rogers, top picks in the NFL draft do not always produce. Beyond the Lions, we have shown that predicting the future performance of a quarterback – even one that has been in the league awhile – is very difficult. This uncertainty reduces the incentive to do everything you can to improve your draft position.

Secondly, one player cannot easily turn an NFL team around. Even a great quarterback cannot make a team win. Teams need an offensive line, receivers, a running game, and a defense to be successful. One great quarterback (or one great wide receiver, or linebacker, etc…) can only take you so far.

Finally, NFL teams have 22 positions to fill. Even if you pick out of the top 10 it is possible to secure the best talent at your position of need. Given all this, the incentives facing NFL teams are not quite the same we see in the NBA.

As for baseball, the incentives appear to be even smaller. Certainly the uncertainty regarding future performance is even greater. In baseball you are taking a player who has to navigate the minor leagues before he can even reach your Major League roster. Odds are very long for any player to even make it to “the show”, let alone have a substantial impact on your team’s fortunes once he gets there.

Answering the question

So to answer the question, the difference between the NBA and the other sports leagues is the incentives the teams face. NBA teams are much more likely to “know” that a talent can dramatically change their future fortunes. They also know what they can do to secure that talent. Consequently, we should not be surprised when the best players on losing teams suddenly find themselves sitting a lot at the end of an NBA season.

In contrast, in both the NFL and MLB, we simply do not see the same incentives to lose games to improve draft position. Consequently we do not see much of this behavior.

Future topics

A couple of days ago I asked what people wanted me to write about in the future. Here are a few requests people made:

Analysis of the NBA draft. This is the subject of a pair of academic articles I am working on – with Stacey Brook and Aju Fenn – so there will definitely be more on this topic soon.

Analysis of player transactions this summer. This will also be something I will do. Especially since I will have more time (I hope) this summer.

Analysis of NBA history. This sounds like a good idea as well. If you have something you wish for me to look at in the past – and there have been a few requests already – I will try and look at this as well.

Thanks to everyone for taking the time to post a comment. Hopefully this summer I will be able to get to these requests.

– DJ

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