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The NFL Draft – Auction Style

With the current structure of the NFL Draft, each of the 32 teams pick 1 player per round for 7 rounds, with the order of picks occurring in reverse order of the previous season’s performance. This is supposed to add parity to the league by allowing for the worst teams to get the players who are projected to be the best, but those projections do not always come to fruition. Instead, teams end up spending huge sums of money for players who frequently fail to live up to their salaries. Because of the fixed draft order, there is no market competition for players, and the prices are often driven up by players who hold out of training camp before they sign their contracts.

Three researchers from Harvard Business School have suggested an auction format alternative for the NFL Draft to force market competition for players and shorten the gap between players’ salaries and the value they add to their teams. Each team would be allowed 7 picks and a total salary cap that allows teams with bad records to spend more money than teams with good ones. The league would then hold an ascending-bid auction for players in which any team can bid on any player, but they must not surpass their salary cap or win the auction for more than 7 players. Assuming all teams employ the ascending-bid dominant strategy of staying in an auction until the current bid reaches their true value for the player in question, teams will not have to pay more than the value of the next-highest bidder for each player.

This proposed auction format fundamentally alters the way teams pursue players. Rather than ranking the players they want and paying a price consistent with the spot in the draft that they choose the player in, teams will value players and pay a price consistent with the market value for each player.

http://online.wsj.com/article/SB10001424052748704133804575198154038855396.html#project%3DNFLNewDraft1004%26articleTabs%3Darticle

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