The endowment effect and the trading of draft picks in major professional U.S. sports

Jeff Hobbs and Vivek Singh

Economic Inquiry, 2022, vol. 60, issue 4, 1929-1942

Abstract: Several studies have examined the endowment effect. Others have documented the influence of behavioral economics in sports. However, there exists little research on the endowment effect in sports. We study this phenomenon through the trading of draft picks in three major professional sporting organizations: the National Basketball Association, National Football League, and National Hockey League. We find strong evidence of the endowment effect overall and varying degrees of it across leagues. We find that it exists beyond information asymmetries, differences in trading activity, the prior short‐term trading relationships of the teams involved and the desire of non‐endowed, one‐time owners of picks to repurchase those picks.

Date: 2022
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