Monday, November 7, 2011

Who will "win" the basketball bargaining standoff?

The axiomatic or "simple" view of bargaining suggests that the alternatives to agreement determine the terms of agreement.  For the following reasons, players have a lot more to lose than owners:
First, the owners are losing net revenues, the players their gross revenues. 
Second and most important, owners are sacrificing SR (short run) net revenues for LR (long run) increases in franchise values from cost control. Players have no LR gains to motivate SR pain. 
Owners have a LR view, players SR, so it makes much less sense for players to take a SR hit without a big offsetting gain.
For these reasons, one would predict that the owners would capture a bigger share of the gains from trade.  


  1. True, until a competing league scoops up the talent and forces the NBA owners to make some concessions. Overseas leagues are already getting in on the action, but a domestic league (anyone remember the ABA?) could really make this interesting.

  2. League creation barriers to entry are significant.

  3. The competing leagues still won't be able to offer the money that the NBA offers no matter how "bad" of a deal the players end up, plus the fact that few would even want to play in another league even if they were paid a premium. The NBA players have had some amazing deals in the past, better than any other league in professional sports. Even a split below 50% is an amazing deal!