Graduation Year

2015

Date of Submission

12-2014

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Murat Binay

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© 2014 Scott E. Anderson

Abstract

The National Basketball Association (NBA) has recently come under scrutiny from media and fans due to the perception that some franchises are losing games on purpose in an attempt to win a higher draft pick. While researchers have concluded tanking does exist in the NBA, this is the first paper to analyze the strategy’s success in terms of generating increases in future winning percentage or future franchise value. This paper, through panel data regressions controlling for fixed effects for 21 seasons, has found that tanking does have a large impact on future winning percentage. A team that tanks typically sees a significant increase in wins of approximately 9.87 games between the 2nd and 4th year after the team tanked. These results have large implications for the league as the NBA recently began draft reform discussions to reduce the incentive to tank. This paper validates the leagues’ belief that draft reform must occur as tanking can give an unfair advantage in future years.

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