In economics there is some disagreement on whether costs that have been incurred and cannot be recovered matter for decision making. While neoclassical economists would argue that bygones are bygones that should not matter, behavioral economists believe that sunk costs do affect future decisions. A new IZA discussion paper by Daniel Leeds, Michael A. Leeds and Akira Motomura takes this economic question to the sports arena by examining the playing time of basketball players in the National Basketball Association (NBA). In the NBA, new young players are recruited via the draft where each team chooses a player from the pool of eligible players according to a pre-determined order. Thus, the team which is allowed to make the first pick has the best chances to select the most skilled player. Having incomplete information of the young players’ abilities, teams might, however, make a bad pick and choose a player who turns out to be not very helpful for the team. In the neoclassical paradigm, a team should give the greatest playing time to its most productive players regardless of how – and at which draft position – they were acquired. However, sports commentators constantly report that teams are committed to specific players because they had used high draft choices or paid high prices to obtain them, which would be more in line with the reasoning of some behavioral economists.
In the paper, the authors investigate whether players picked early in the draft process, that is, those who were relatively costly, are treated differently from otherwise identical players who are chosen later. The authors find no evidence that NBA teams commit more to players whom they picked early in the draft process. The results show that players drafted early receive no more playing time – and, in some situations, even less playing time – than other players. Hence, the authors conclude that their findings strongly support the neoclassical outlook.