Hi, everyone. Today we're going to talk about the Basketball Economics.
Hear about basketball, what's your first thought?
Jersey? Basketball shoes? Or...
yes, the topic is about the market of the NBA basketball players
First of all, we will start from 1989
when FIBA, the Fédération Internationale de Basketball
voted to eliminate the distinction between amateurs and professionals.
This ruling meant that international players could play in the NBA
without being disqualified from representing their countries in the world competitions
and thus started the flow of international players into the NBA
But due to the limited time and the lack of stats, under the condition of information asymmetry
it would make the players' salaries are not consistent with their performance
It means the salaries are higher than the players should have been
after accounting for their personal characteristics and on-court performance in the previous season.
The best example is Kwame Brown.
And this phenomenon is called the “winner’s curse”
The winner's curse appears when the player's value can't be accounted properly.
Because of excessive optimism or the lack of stats,
the team will overestimate the player’s value, and then suffers loss
Another possible reason is when the player’s value is not easy to account.
If estimate correctly, the team may lose the bid
and if overestimate, the team may win the bid, but also get some loss.
The disappearance of the premium paid is attributed to estimate the Marginal Revenue Product
The team can look at the performance to evaluate the players.
For example, a team might look at the points scored, total rebounds, and assists.
And plus the experience, age, height, and etc.
Further, a team might also look at how the public will embrace a given player as a predictor of his drawing power.
But in this video we will focus on the player's performance in the seasons.
Divide all the players into two parts
the first we call it the backcourt which includes the guards, and the small forward
The second is called the frontline including the power forward and the center.
And then we will determine which stats are the most relative with the players’ salaries
In our research, we choose some of the stats, which are influential to wages.
There are six stats when it comes to the backcourt, and five stats for the frontline.
Before we start our analysis and discussion
we first inquire of the fans which factor correlate to wages the most.
For the backcourt players, top three are PTS, AST and 3P%.
And for the frontline players, REB, BLK and FT% stands out.
Then, let’s move on to see if the results to our research and the perspectives from the fans are identical.
First of all, we list the top 100 players who got the highest salary during the years 2003~2014 individually
And we rank and classify those players by the amount of their wages, the backcourt and the frontline
Next, we apply correlation coefficient to check the impact on each other.
That is, we calculate the relevant level between each datum and wages by EXCEL.
And conduct a hypothesis test to clarify if there is actual relation between wages and each datum.
We’ll do so by using a t-test with a confidence level of 95%.
Then we can find that both stats and wages are related.
Lastly, we’ll draw a proper conclusion.
For the backcourt players, in the subjective viewpoint,
the top three stats which are influential to the wage are PTS, AST and 3P%.
And in the objective viewpoint, PTS, AST and +/- stands out.
We can find that the 3P% is the most different thing
between the subjective and the objective data.
We infer that the Golden State Warriors went viral caused three point field goal prevails in the NBA.
For the fans, competition of three point field goal between the players
definitely adds more excitement to the games.
However, the three point field goal didn’t prevail in the period of the data we test.
For the frontline players, in the subjective viewpoint,
the top three stats which are influential to the wages are REB, BLK and FT%.
And in the objective viewpoint, PTS, +/- and REB stands out.
We can infer that the fans’ expectation of a worth watching game,
which will reflect on their anticipative performance of a player.
So, they believe that the rebounds are important to the frontline.
However, NBA is a professional but commercial league.
In order to attract more spectators to create more business opportunity,
the team will take the data correlate to score into consideration primarily
After all, the win and lose of a game are result from the point.
Therefore, the objective stats indicate some differences against the subjective viewpoint.
Thanks for your watching.