 Rank-Based Groupings and Decision MakingQuinn A. W. Keefer Journal of Sports Economics, 2016, vol. 17, issue 7, 748-762 Abstract: Rank-based groupings are uninformative signals of quality when the exact rank is known; therefore, they should be ignored in decision making. However, evidence is presented that rank-based groupings are used to determine the compensation of rookie players in the National Football League (NFL). The NFL draft, which largely determines rookie compensation, provides two signals of player quality, selection number, and round. However, the rounds are simply groupings based on selection number; thus, the rounds should not affect subsequent decisions. Sharp regression discontinuity design (RDD) estimates of discontinuities in rookie compensation at the round cutoffs are shown to be very large and robust. The first to second round discontinuity is −US$240,000 to −US$250,000, or 36% of the average salary of the first selection in the second round. The second to third round discontinuity is −US$60,000 to −US$70,000, or 17% of the average salary of the first selection in the third round. The results show rookie compensation, which comprises a large share of career earnings, is subject to heuristic thinking. Keywords: rank-based groupings; regression discontinuity; compensation; NFL; NFL draft (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sae:jospec:v:17:y:2016:i:7:p:748-762 Access Statistics for this article More articles in Journal of Sports Economics |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.