NBA Players and Owners Currently Involved in Bargaining Games
The National Basketball Association (NBA) and National Basketball Players Association (NBPA) are in a stalemate as they enter the fourth month of an owners’ lockout. With the season set to begin less than a month from now, the players and owners have failed to come to terms on a new Collective Bargaining Agreement. The presence of the lockout is already being felt as players are agreeing to play for teams overseas next season, training camps are cancelled, and as the likeliness of preseason games being cancelled increases. If both sides fail to come to terms within the next few weeks, the 82-game season will indefinitely be cancelled for the second time in the history of the National Basketball Association.
Game Theory is an integral part of the discussions being carried out, as neither players nor the owners want to concede too much during the bargaining process. This game consists of the players and owners as the players, various strategies, and outcomes with varying payoffs depending on the strategies chosen. The outcome of the lockout has tremendous financial impacts on both groups as the allocation of hundreds of millions of dollars are currently being discussed. The two main sticking points of the labor discussions involve the division of revenues generated by the league and the type of salary cap system to be put into place. In the past system, players were guaranteed 57 percent of basketball-related revenue to be spent on their salaries. Owners want to decrease this percentage so that their teams become more profitable. Owners are also arguing for a hard salary cap system, which means that teams have a clear-cut limit as to how much they can spend on players’ salaries. The past system allowed teams to spend more than the limit as long as they paid a luxury tax for passing the threshold. This seemingly gave a competitive edge to teams that either had wealthy owners or teams that were extremely profitable.
The concept of Prisoner’s Dilemma can be seen in the outcomes related to the NBA lockout. If both sides fail to come to an agreement in the near future, then the 2012 NBA season faces the possibility of being cancelled. For the players, the payoffs of a cancelled season are unpaid salaries and a year of wasted athletic youth. For the owners, the payoffs of a cancelled season are millions of dollars of ticket revenue loss, advertisement revenue loss, and the potential loss of thousands of NBA basketball fans throughout the world. For both parties, this is an undesirable outcome of the lockout. If both sides make concessions, then there will be a combination of positives and negatives for each party when determining their payoff matrix. The payoffs of this outcome will not be nearly as negative as it would be if a lockout occurred. Finally, one party can make concessions first and succumb to the demands of the counter-party for the sake of ensuring the 2012 NBA season. If this occurs, that party will lose their bargaining power in the discussions and most likely make significant concessions in comparison to the counter-party. As the discussions in this four-month long lockout continues, it will be interesting to see how the players and owners continue to behave in this example of Game Theory.
Source: http://espn.go.com/nba/story/_/id/7045310/2011-lockout-nba-players-owners-meet-seven-hours