Basketball Puzzle

[Ananda Gupta]

OK Armchairs, here's a puzzle:

In discussion of her recent article
(http://www.washingtonpost.com/wp-dyn/articles/A14426-2002Apr19.html) about
Kwame Brown, the first ever high schooler to be taken #1 overall by an NBA
team, Sally Jenkins mentioned that both the NBA itself and the NCAA would
like to simply ban players under 20 from playing professional basketball in
the U.S. Jenkins notes that the chief reason such a ban hasn't already
become NBA policy is opposition from the players' association. This flies
in the face of most models of union behavior: unions are supposed to like
lower labor supply, because it drives up wages. So why does the NBA
players' union oppose a measure that would lower labor supply by denying
draft entry to high school players?

Possible answers:

1. Agents are the ones who are really in charge; they maximize their own
incomes by representing as many players as possible. They also have an
incentive to represent "high potential" players who will sign big contracts
and drop out of the league after three years, since this sort of contract
represents fast cash with little long-term investment -- a fairly common
occurrence among high school players. Agents thus use their influence over
players (and by proxy the players' union) to keep the door open for high
school players. Objection: why don't less popular agents point this out to
players and use it as a selling point?

2. Having extremely raw high school players in the league helps less
talented veterans polish their images, since the high school players make
dumb mistakes and make the veterans who play against them look
better. This leads to better negotiating positions for the veterans, who
believe their wages increase more by letting in the HS players than if they
were to remove this source of wage competition. Objection: The majority of
HS players play few minutes in the first two years, minimizing their
visibility. Some don't play at all during their "development".

3. The salary cap (the ceiling on the total amount that teams can spend on
player contracts) is a percentage of gross revenue. Maybe the expected
value of a high school superstar five years after he is drafted will
increase ticket sales so much that the team will have salary cap room to
reward its veterans. So it's in their interest to allow teams to take
risks on high school players. Objection: Rookie contracts last two or
three years; after that, a player will renegotiate. If he turns out not to
be a bust, then his cost will rise substantially, so the team doesn't
economize by drafting him and keeping him on the bench (as opposed to
letting someone else draft him and then trying to get him as a free agent
once his rookie contract expires).

Any thoughts?

ASG