The purpose of this paper is to analyze the 2011 National Basketball Association (NBA) lockout and collective bargaining agreement (CBA).
Using a bargaining game model, the authors show that asymmetric information via owner revenue shifting and financial non-disclosure caused the conflict between owners and players (growth of player salaries) to result in a lockout.
The bargaining game also demonstrates the lockout to be a rational response to asymmetric information: by restricting the growth of player salaries, owners improved their competitive position. Other factors motivating the lockout include the indirect benefit to the median owner of repressing player salaries (i.e. greater expected competitive balance) and a principal agency problem within the players’ union. The lockout concluded with a ten-year CBA, a mutual opt-out in 2017, and revenue sharing between 49 and 51 percent of basketball-related income. The league salvaged a shortened 2011-2012 season, but created an economic framework more favorable to owners.
This paper is novel in its analysis of the bargaining aspects of the current NBA collective bargaining agreement.
