Labor Relations: Just a Game
The NBA and the NBPA (National Basketball Player’s Association) engage in negotiations toward their collective bargaining agreement every few years, this happens because the prior contract expires or one of the parties opts out. Negotiations will likely begin again in 2017, as the players and their union presumably opt out of the current deal that splits basketball related 50-50 between the league and the players. The collective bargaining agreement between these two parties lays out how the league will operate while keeping the NBA in accordance with antitrust laws. If these two parties had no collective bargaining agreement, the NBA would be in violation of federal antitrust laws for having a salary cap and a draft. Along with this some players could be left without a job because the structure of the league would change. The absence of an annual draft may cause less players to make it to the NBA. The absence of a salary cap may cause teams to allocate their financial resources in such a way that they only target upper level players and lower level players, cutting out middle level players. It is essential that a collective bargaining agreement is formed, for if not, a lockout ensues.
In class we discussed ultimatum games; these are games that involve two parties dividing a fixed amount of resources (typically money) where one of the persons proposes a split and the other person either accepts or rejects the offer. Regardless or not if the offeree accepts or rejects the offer, the game ends. Another type of game is the dynamic bargaining game. This game is similar to the ultimatum game, it involves an offer that can either be accepted or rejected and a probability of the negotiation breaking down and the possibility of future negotiations being terminated. At this point, players in the game must entertain their outside options. However, unlike the ultimatum game, the decision of the offeree does not necessarily end the game. For instance, if the initial offeree rejects the initial offer, they can make a counteroffer and become the offeror.
The NBA and the NBPA engage in a game that is somewhat of a hybrid between an ultimatum game and a dynamic bargaining game. The players are obviously the NBA and the NBPA. The offers are the provisions that the two parties want included in the collective bargaining agreement and the portion of basketball related income that the parties want. The latter will probably be the determining factor in the deal due to a new television deal worth 24 billion dollars over nine years beginning in 2016. Although there is no true ultimatum in this game, if the two parties do not come to agreement and mutually accept an offer, a lockout will ensue. Unlike in an ultimatum game, negotiations will continue, but in this case league play will be suspended. The outside options are a little less obvious than the players and the offers in this game. The NBA and the NBPA cannot, within in reason, come to an agreement with another party; instead, the outside options of these two parties are the offers of the other party and offers that are compromises to the other party’s offer. There is also a possibility of the two parties not coming to an agreement, this is similar to the probability of negotiations breaking down in dynamic bargaining games, accept that if the NBA and NBPA do not initially come to an agreement, they can attempt to negotiate again.
http://www.cbafaq.com/salarycap.htm#Q4
http://www.si.com/nba/2015/09/20/adam-silver-michele-roberts-cba-negotiations