Academic journal article Journal of Physical Education and Sport

Sunk Cost Effect in the Korea Basketball League

Academic journal article Journal of Physical Education and Sport

Sunk Cost Effect in the Korea Basketball League

Article excerpt


Decision makers generally make rational decisions based on prior results, but this does not always lead to desirable outcomes. Irreversible costs due to choices that cannot be reversed can accrue through the commitment of resources (Borland, Lee and Macdonald 2010). Although decision makers tend to consider only the additional expenses and benefits when making rational decision, they also tend to overestimate the initial expenditure and then exaggerate the investment (Thaler 1980).

From an economic perspective, unrecoverable costs should be ignored in rational decision making; unfortunately, decision makers are obsessed with them, as well as with time and effort (Gupta 2009). Making investments despite past costs that cannot be recovered is called the "sunk cost effect" (Arkes and Blumer 1985; Brockner and Rubin 1985). Though considering sunk costs during decision making is obviously irrational, the process has been studied in various fields, such as personal decision making, interpersonal decision making, new product development, financial decision making, and performance evaluation (Bazerman et al. 1982; Biyalogorsky et al. 2006; Garland 1990; Garland and Newport 1991; Heath 1995; Soman and Cheema 2001). People will tend to use unsatisfactory services or products because they have paid for them, such as someone who continues to work out despite suffering back pain after having paid for an expensive membership at a fitness center.

This phenomenon has also been found in professional sports. According to Bourgie (2001), team managers must make tough decisions about player utilization, such as starting lineup, player substitution, and strategies, before every game because a player's talent and experience are not perfect predictors of performance. In professional basketball, rookies entering the league are allocated to teams ever year during the draft. Managers seek to acquire outstanding rookies early in the draft. Rookies selected in the first round may receive higher salaries and face higher expectations than the others selected during the second or third round. In addition, many teams in the professional basketball league (including the National Basketball Association; NBA) plan to do less than everything they can to win in order to accumulate some losses and thus obtain a higher pick in the upcoming draft, even though teams should always put the best team possible on the court as often as possible. This strategy is called "tanking" and can be used over several months or even several seasons (Exter 2013).

In this context, rookies are always in the spotlight as agents of team-rebuilding strategies, in terms of either a breakthrough after poor results or expectations for new talent. However, if they do not prove their value, managers may decide to keep them on the bench. Therefore, this study examines the sunk cost effect, an irrational behavior, by using Korean professional basketball players' performance records and playing time.

Korea Basketball League and its draft system

The Korea Basketball league (KBL) started in 1997 with only 10 teams. Prior to the league, several companies had managed their own amateur basketball teams. To boost fan interest and improve game quality, the KBL permitted each team to have tryouts and drafts for two foreign players. This foreign player rule was thereafter frequently revised because the foreign players became pivotal to winning games. The foreign player tryouts and drafts came to determine each season's result. To address this systemic flaw, the KBL ruled that only one of the foreign players could be on the court during a game.

Thus, the rookie draft was critical. It was revised many times in terms of selection order, appropriate method, and upper payment limit. The main mechanism of the draft is the "equality" rule, designed to prevent wealthier teams from monopolizing the outstanding players. Before this rule, inappropriate scouting and contracts were common, by which talented players would join a club along with other, less talented players included in the deal as a package. …

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