TY - UNPB
T1 - Do Individual Salaries Depend on the Performance of the Peers? Prototype Heuristic and Wage Bargaining in the NBA
AU - Oberhofer, Harald
AU - Schwinner, Marian
PY - 2017
Y1 - 2017
N2 - This paper analyzes the link between relative market value of representative subsets of athletes in the National Basketball Association (NBA) and individual wages. NBA athletes are categorized with respect to multiple performance characteristics utilizing the k-means algorithm to cluster observations and a group's market value is calculated by averaging real annual salaries. Employing GMM estimation techniques to a dynamic wage equation, we find a statistically significant and positive effect of one-period lagged relative market value of an athlete's representative cluster on individual wages after controlling for past individual performance. This finding is consistent with the theory of prototype heuristic, introduced by Kahneman and Frederick (2002), that NBA teams' judgment about an athlete's future performance is based on a comparison of the player to a prototype group consisting of other but comparable athletes.
AB - This paper analyzes the link between relative market value of representative subsets of athletes in the National Basketball Association (NBA) and individual wages. NBA athletes are categorized with respect to multiple performance characteristics utilizing the k-means algorithm to cluster observations and a group's market value is calculated by averaging real annual salaries. Employing GMM estimation techniques to a dynamic wage equation, we find a statistically significant and positive effect of one-period lagged relative market value of an athlete's representative cluster on individual wages after controlling for past individual performance. This finding is consistent with the theory of prototype heuristic, introduced by Kahneman and Frederick (2002), that NBA teams' judgment about an athlete's future performance is based on a comparison of the player to a prototype group consisting of other but comparable athletes.
UR - https://www.wu.ac.at/economics/forschung/wp/
U2 - 10.57938/69ef063e-5496-4b65-bed5-5f7aacda3c36
DO - 10.57938/69ef063e-5496-4b65-bed5-5f7aacda3c36
M3 - WU Working Paper
T3 - Department of Economics Working Paper Series
BT - Do Individual Salaries Depend on the Performance of the Peers? Prototype Heuristic and Wage Bargaining in the NBA
ER -