03 November 2011

On the death of the NBA season

Rational choices, yeah right. Good luck getting people to make them.

This lockout reminds me of the problem of the ultimatum game. Put two people in a room. Give one of them 100 dollars. Tell them that the two people there have to make a deal in order to get anything of that money. If either side rejects the proposed deal as made by the money holder, then nobody gets anything. Usually the deal arrived at is somewhere in between 33-40% at the low end (on average). Even though if you aren't the possessor of the money, any deal actually benefits you and so you should accept anything other than "I'll just keep it all for myself". (note, recent psychology studies in smaller societies like hunter-gatherer tribes in Brazil for example suggest that they are more willing to accept "unfair" deals than Americans/Westerners. But there aren't many former or current hunter-gatherer tribesmen in the NBA player's union).

In the NBA case, the players are the ones sitting out and owners the ones having the money. Deciding to sit out the season in order to "spite" the owners gains players nothing. Diehard basketball junkies like me will suffer through college basketball, a largely inferior product because of much lower skill level, until they return. Casual basketball fans will mostly do the same, but may hold a grudge for a period of some years, diminishing the size of the market pie to be divided further. So players have no leverage to demand more. What's more, holding out over 2.5% when that amount still guarantees to you HALF of the pie, seems a little insane, not just foolish. Certainly you can argue that players might deserve more than half based on their actual economic worth to the teams they play for by providing an entertaining service to fans. That's certainly possible, though you have to consider boring things like the licensing fees, marketing, and ownership/leasing of arenas to play in, plus a desire for profitability by management of any enterprise, even entertaining monopolies and not just the athletic achievements visible on the court. Certainly you can argue that it makes owners look greedy to fight on that line (though the same argument could easily be applied to players). But those are arguments that loom much smaller when one is dividing up and fighting over several hundreds of millions of dollars.

Sometimes when two parties fight, one party is completely in the wrong and has to compromise more to restore balance to the relationship. At other times, it isn't in the wrong, but if it wants to sustain a relationship with the other party it has to compromise anyway (and in this case, the players have no choice but to sustain the relationship, there is no competing league for most of them to go to). Paying a price to stand on principle does not net anything here. The rational choice is in fact to cave, at least on that issue.

But that's not going to happen. 
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