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NBA Trading

Most of the professional sports leagues in the U.S. allow trading among clubs, which can be viewed as a miniature economy, especially in NBA. For instance, players’ service under contract with NBA can be exchanged in the system. The maximum parties involved in one trade can be all the NBA teams, in theory. There are rules governing what can be traded, for example, multiple players in one team can be used to trade for one player in another team, as long as the salaries paid to those multiple players are similar to the salary paid to that one player. Every team has a salary cap, which is the total amount of money that one team can spend on paying salary to the players. In the 2017-2018 season, it’s set at 99 million. If we only focus on trading among the team, money may not be a currency at all, although money is involved in this system as the salary pays to the players. For instance, if player A’s salary is too far away from player B’s salary, the team which player A serves cannot just pay the player B’s team the difference and make the trade happens, technically. It’s a good choice because it will prevent the rich team to just buy out all the best players in the league. Clearly, the tradeoffs in switching to use money as part of trade will be the spike of imbalance between the teams.


Therefore, this market is very similar to a weakly preference with initial endowment matching. Each team will have a preference for who they want to get in exchange for their own “initial endowment(s)”(they could be multiple players’ service). However, the preference of each team is not known, publicly.



Some features of this market are the deadline for the exchange and non-centralized trading practice. For instance, in order for team A to trade with team B for certain player(s), team A must individually talk to team B about it, and team A is not even sure whether team B wants to trade those players in the first place. Therefore, a good alternative practice may be to set a date and ask each team to post who they want to use for exchanges. After that, ask them to submit a preference out of the available players that are posted. This will more likely to solve the information inefficiency in the marketplace.






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