" The Sports Business as a Labor Market Laboratory," " Functional-coefficient spatial autoregressive models with nonparametric spatial weights," " Escalation effects and the player draft in the AFL," Borland, Jeff & Lee, Leng & Macdonald, Robert D., 2011." Spatial Price Competition: A Semiparametric Approach,"Įconometrica, Econometric Society, vol. & Motomura, Akira, 2013.ħ801, Institute of Labor Economics (IZA). " Are Sunk Costs Irrelevant? Evidence from Playing Time in the National Basketball Association,"ġ304, Department of Economics, Temple University. Our results indicate that a small but significant sunk-cost effect is found. We build upon these studies by using salary to measure the impact of financial commitment on playing time, by using a fixed-effect panel data model to control for unobserved individual heterogeneity which may have been biasing previous results, and by using a spatial econometric model for a robust check of playing time dependence among players within each team. Previous similar studies have looked at whether NBA teams irrationally escalate commitment to their highest drafted players by giving them more playing time than their performance warranted, coming to mixed conclusions. Whether decision-makers in the real world uphold this normative theory and ignore sunk costs has been the topic of much empirical work. Therefore, NBA teams should be playing their most productive players, regardless of salary. According to economic theory, rational agents make decisions based on marginal expected benefits and costs, and non-recoverable costs should not influence decision-making. We analyze the effect of player salary, a sunk cost, on player utilization in the National Basketball Association (NBA).
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