Carry-Over Lottery Allocation: Practical Incentive-Compatible Drafts

TL;DR

The paper introduces COLA, a practical and incentive-compatible draft mechanism that uses multi-year outcomes and ticket carry-over to incentivize weaker teams and reduce deliberate losing in sports leagues.

Contribution

It proposes a novel multi-year lottery system that replaces single-season standings, addressing incentive issues and implementation challenges in sports drafts.

Findings

COLA incentivizes weaker teams to compete fairly.

The mechanism maintains fan engagement through familiar lottery formats.

It effectively discourages deliberate losing by adjusting lottery ticket dynamics.

Abstract

The NBA draft can incentivize teams to deliberately lose. We propose a draft mechanism that is practical, incentive-compatible, and favors weaker teams. The Carry-Over Lottery Allocation (COLA) framework represents a paradigm shift in evaluating team quality, replacing single season standings with multi-year playoff outcomes. In our proposed mechanism, every non-playoff team receives the same number of lottery tickets, removing incentives to lose. Lottery tickets carry over to future lotteries, but playoff success or winning a top pick diminishes a team's accumulated tickets. The lottery is familiar and preserves fan engagement. Implementation challenges are addressed to demonstrate feasibility, including transitioning to COLA, handling trades, and accommodating draft classes of varying strength. For exceptionally strong classes, teams may prefer the lottery to the playoffs. We provide a solution, employing a truth-elicitation mechanism to identify such years and expanding lottery eligibility to include as many playoff teams as necessary to preserve incentive compatibility.