A Study in Conflict Analysis

Founded in 1946

3rd-most lucrative sports league in the world

$3.384 Billion in basketball-related income in 2006-2007

NBA Owners

NBA Structure

NBA Players[Unionized]

CollectiveBargainingAgreement

$0$100,000$200,000$300,000$400,000$500,000$600,000$700,000$800,000$900,000

$1,000,000

1954

AverageSalary

Owners were frustrated Players salaries were increasing

Salaries

$0$100,000$200,000$300,000$400,000$500,000$600,000$700,000$800,000$900,000

$1,000,000

1954 1976

AverageSalary

$0$100,000$200,000$300,000$400,000$500,000$600,000$700,000$800,000$900,000

$1,000,000

1954 1976 1983

AverageSalary

$0$100,000$200,000$300,000$400,000$500,000$600,000$700,000$800,000$900,000

$1,000,000

1954 1976 1983 1991

AverageSalary

Salary Cap: Maximum amount a team can spend on player salaries

Calculated as percentage of league’s income.

Example:• In particular year, League brings in $3 Billion• Salary cap agreement is set as 50%• 50% of $3 B = $1.5 B• Divide $1.5B by 30 teams = $50 M

1983: Salary Cap Introduced

“Soft” Salary Cap – Teams have exceptions, and can find loopholes.

Owners would ideally implement “hard salary cap”, but the players would never accept such a plan.

“Soft” Salary Cap

Star players were demanding large contracts. If one owner refused, another would accept.

Teams were spending too much to be competitive.

Salaries Revisited

Example:1996Shaquille O’Neal7 years, $122

Million

March 1998 – June 1998

Owners vote to re-open the collective bargaining agreement.

Owners insist on “luxury tax” – 100% tax on every dollar spent over salary cap.

Players reject, they want to keep the current system, or slightly decrease salary cap percentage.

The Conflict

i. NBA - Owners/Commissioner (David Stern)

ii. NBPA/Players Union (Billy Hunter)

[Billy Hunter][David Stern]

1. Implement new Collective Bargaining Agreement

2. Accept NBPA counterproposal3. Lockout the players 4. Use replacement players if at an

impasse

1. Accept owners’ plan2. Table counterproposal3. Reject proposal/Strike

NBA

New Plan N Y N Y N Y N Y Y N Y N Y

Accept Counter Y Y N N Y Y N N Y N N Y Y

Replacement Players

N N Y Y Y Y N N Y N N N N

Lockout N N N Y Y Y N N Y N N N N

NBPA

Accept Owners’ Plan

N N N Y Y Y N N Y N N N N

Counterproposal N N N N N N Y Y N Y Y Y Y

Strike N N N N N N N N Y Y Y Y Y

Decimal … 2 3 4 … 29 30 31 32 33 … 95 96 97 98 99 …

NBA

New Plan N Y N Y N Y N Y Y N Y N Y

Accept Counter Y Y N N Y Y N N Y N N Y Y

Replacement Players

N N Y Y Y Y N N Y N N N N

Lockout N N N Y Y Y N N Y N N N N

NBPA

Accept Owners’ Plan

N N N Y Y Y N N Y N N N N

Counterproposal N N N N N N Y Y N Y Y Y Y

Strike N N N N N N N N Y Y Y Y Y

Decimal … 2 3 4 … 29 30 31 32 33 … 95 96 97 98 99 …

NBA

New Plan N Y Y N Y N Y Y N Y N Y

Accept Counter Y Y N Y Y N N Y N N Y Y

Replacement Players

N N Y Y Y N N Y N N N N

Lockout N N Y Y Y N N Y N N N N

NBPA

Accept Owners’ Plan

N N Y Y Y N N Y N N N N

Counterproposal N N N N N Y Y N Y Y Y Y

Strike N N N N N N N Y Y Y Y Y

Decimal … 2 3 … 29 30 31 32 33 … 95 96 97 98 99 …

NBA

New Plan N Y Y N Y N Y N

Accept Counter Y Y N N N N N Y

Replacement Players

N N Y N N N N N

Lockout N N Y N N N N N

NBPA

Accept Owners’ Plan

N N Y N N N N N

Counterproposal N N N Y Y Y Y Y

Strike N N N N N Y Y Y

Decimal … 2 3 … 29 32 33 … 96 97 98 …

10 possible states remain

1 2 3 4 5 6 7 8 9 10

NBA

New Plan Y Y Y Y N Y Y Y N Y

Accept Counter N N N N Y N N N Y N

Replacement Players

N N Y N N N Y N N Y

Lockout N Y Y N N Y Y N N N

NBPA

Accept Owners’ Plan

Y Y Y N N N N N N N

Counterproposal N N N Y Y Y Y Y Y Y

Strike N N N N N N N Y Y Y

Decimal 17 25 29 33 34 41 45 97 98101

NBA NBPA

NBA

New Plan 10 -7

Accept Counter 6 5

Replacements -5 -7

Lockout -3 -4

NBPA

Accept Owners 10 -7

Counterproposal 6 5

Strike -4 -3

Initial weightings

Both parties in favour of signing a contract rather than moving to strike or lockout

Preference Vector was created from option weightings

Equilibrium predicted at State 4

NBA

x x E x x x x x x x Overall stability

r r r u u u r u u u Player stability

1 2 4 6 5 3 8 7 9 10 Preference vector

4 4 2 6 8 8 UI’s

6 9

NBPA

r r r u r r r u u u Player stability

5 9 4 8 6 10 7 1 2 3 Preference vector

4 4 6 7 UI’s

8

Equilibrium predicted at State 41 2 3 4 5 6 7 8 9 10

NBA

New Plan Y Y Y Y N Y Y Y N Y

Accept Counter N N N N Y N N N Y N

Replacement Players

N N Y N N N Y N N Y

Lockout N Y Y N N Y Y N N N

NBPA

Accept Owners’ Plan

Y Y Y N N N N N N N

Counterproposal N N N Y Y Y Y Y Y Y

Strike N N N N N N N Y Y Y

Decimal 17 25 29 33 34 41 45 97 98 101

Adjusted option weightings for NBA and NBPA

Resulted in new equilibrium states

New option weightings

NBA takes tougher stance

NBA NBA New NBPA Old

NBA

New Plan 10 10 -7

Accept Counter 6 3 5

Replacements -5 0 -7

Lockout -3 0 -4

NBPA

Accept Owners 10 10 -7

Counterproposal 6 3 5

Strike -4 -1 -3

2 new equilibriums

NBA

E E E E Overall stability

r r r r r r r r u u Player stability

1 2 3 4 6 7 8 10 5 9 Preference vector

4 8 UI’s

6 10

7

NBPA

r r r u r r r u u u Player stability

5 9 4 8 6 10 7 1 2 3 Preference vector

4 4 6 7 UI’s

8

New option weightings

NBPA takes tougher stance

NBA NBPA Old NBPA New

NBA

New Plan 10 -7 -10

Accept Counter 6 5 7

Replacements -5 -7 -7

Lockout -3 -4 -1

NBPA

Accept Owners 10 -7 -10

Counterproposal 6 5 7

Strike -4 -3 0

1 different equilibrium

NBA

E E Overall stability

r r r u u u r u u u Player stability

1 2 4 6 5 3 8 7 9 10 Preference vector

4 4 2 6 8 8 UI’s

6

NBPA

r r r r r r r u u u Player stability

5 9 4 8 6 10 7 1 2 3 Preference vector

4 6 7 UI’s

8

Revised option weightings

NBPA misinterpreted preferences of NBA

1st level hypergame

NBA NBA by NBPA NBPA

NBA

New Plan 10 10 -7

Accept Counter 6 0 5

Replacements -5 2 -7

Lockout -3 2 -4

NBPA

Accept Owners 10 10 -7

Counterproposal 6 0 5

Strike -4 0 -3

NB

PA

perc

eiv

ed

gam

e

NBA

E ETrue overall stability

E Overall stability

r r r u u u r u u u Player stability

1 2 4 6 5 3 8 7 9 10 Preference vector

4 4 2 6 8 8 UI’s

6 9

NBA as perceived by NBPA

r s s r u r u u u u Player stability

3 2 1 7 6 10 4 8 5 9 Preference vector

3 3 7 7 10 7 10 UI’s

2 6 6 8

4

NBPA

E E Overall stability

r r r s r r r u u u Player stability

5 9 4 8 6 10 7 1 2 3 Preference Vector

4 4 6 7 UI’s

8

Conflict settled at state 6:

Eventually, the NBPA revised their counter-proposal and resubmitted

The NBA acceptedthis new proposal

NBA

New Plan Y

Accept Counter N

Replacement Players

N

Lockout Y

NBPA

Accept Owners’ Plan

N

Counterproposal Y

Strike N

Season was salvaged (shortened schedule)

Irrevocable loss of TV ratings Estimated loss of $500 million in

player salaries

Practice?