Sunk Costs in the NBA: Why Draft Order Affects Playing Time and Survival in Professional Basketball

Abstract

This research was supported by a faculty research grant from the Institute of Industrial Relations at the University of California, Berkeley. The authors would like to thank Max Bazerman, Glenn Carroll, Marta Elvira, Chip Heath, Mark Mizruchi, Keith Murnighan, Robert Sutton, and Albert Teo for their suggestions on this research and/or comments on earlier drafts of this article. This study represents one of the first quantitative field tests of the sunk-cost effect. We tested whether the amount teams spent for players in the National Basketball Association (NBA) influenced how much playing time players got and how long they stayed with NBA franchises. Sunk costs were operationalized by the order in which players were selected in the college draft. Draft order was then used to predict playing time, being traded, and survival in the NBA. Although one might logically expect that teams play and keep their most productive players, we found significant sunk-cost effects on each of these important personnel decisions. Results showed that teams granted more playing time to their most highly drafted players and retained them longer, even after controlling for players' on-court performance, injuries, trade status, and position played. These results are discussed in terms of their implications for both sunk-cost research and the broader literature on managerial decision making.'