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Testing Coase theorem: the case of free agency in NBA

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This study seeks to test the applicability of the Coase theorem to the allocation of players within. According to the Coase theorem, a player's final allocation would be the same no matter who has ownership of his playing rights if there are no transaction costs. What ownership affects is just the allocation of wealth. Using data from the National Basketball Association (NBA), this article argues that player mobility is likely to be affected by player ownership due to transaction cost imposed by the institution. It is also concluded that performance indicators used for value estimation vary by position and that this also affects player transfer.

Document Type: Research Article


Affiliations: 1: Department of Economics,National Taiwan University, No. 21, Hsu Chow RoadTaipei, Taiwan 2: PricewaterhouseCoopers, Taipei, Taiwan

Publication date: 2011-08-01

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