Trade the Pick: Ending Tanking in Professional Sports

Abstract

To prevent tanking, sports leagues should require every team to trade away its own first-round draft pick—the pick for the draft following that season—before the season begins. After the season, draft order would still be determined in reverse standings order, but no team would own the pick generated by its own performance. Losing would no longer improve a team’s draft position, eliminating in-season tanking incentives.

More broadly, this Draft Pick Trade Deadline is my preferred mechanism for implementing a novel design principle for sports drafts: assigning compensation before the season, based on expected performance, rather than realized performance. Expectations-based draft compensation eliminates tanking incentives while preserving the draft’s core purpose of promoting parity. I prove a theorem showing that the only way to eliminate in-season tanking incentives is to base draft compensation on information unaffected by teams' in-season performance. I also show, using both a theoretical model and an empirical analysis of NBA data, that any expectations-based system achieves what no lottery reform can: a complete decoupling of in-season incentives from draft compensation. Teams expected to perform poorly still receive value, just paid out before the season rather than after. Expectations-based approaches eliminate tanking without sacrificing competitive balance and can be implemented immediately without transition costs.

Keywords: tanking, sports drafts, draft lotteries, competitive balance, sports league design, incentives, mechanism design