Abstract
The National Basketball Association (NBA) has a fixed salary schedule that allows us to examine this labor market to understand the incentives for players to enter the draft. Previous studies have focused on labor as a choice from the team’s perspective. Early entry into the NBA draft is similar to the decision to exercise an American style put option early; the draftee sells his remaining time in college early. Using mock draft and actual draft data, the authors find early exercise to be rational for all class ranks; though the early exercise boundary is considerably different for freshmen and juniors.
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