Looking at NBA’s “game of Chicken” from the outside


On one hand, you can see where the NBA and its players are close to a deal, one that is within reach — they are just a couple percentage points apart. Of course, that is $500 million over the course of a deal, so it’s not a small amount, but still the sides seem close.

On the other side the players seem entrenched and David Stern is talking about canceling games. Plus there are no meetings scheduled. Right now it feels like both sides are risking the entire NBA season over a couple percentage points

University of Notre Dame Finance Professor Richard Sheehan, author of “Keeping Score: The Economics of Big-Time Sports” says that right now both sides are trying to assess if they can get the other side to move a little more (something that was clearly the focus of the union’s letter to players Wednesday).

“Both sides have to analyze how committed the other side is to their position and their own ability to move their opponent away from their position,” Sheehan said. “I suspect that this aspect is what is making life so “interesting” at the moment. You can view the negotiations as a game of “chicken” where each side has an incentive to paint themselves as absolutely crazy — crazy enough to take actions that would cancel the season — unless the other side gives in.

“I think the owners played this part of the game better last time; I think the players now recognize that; and I think that their recognition means the players are going to take a harder line and be less likely to yield further. Of course, the owners presumably recognize the success of their prior strategy and appear to be trying to replicate it now. But the most likely result is that an agreement is much harder to reach. Bottom line though is that how the process evolved last time makes resolution this time more problematic.”

While the formal proposals between the two sides remain far apart, the focus has become on the informal side conversation between the sides that David Stern made public Tuesday. (Union officials are ticked at him for that, by the way.) Sheehan said that Stern was playing to the public with that move, trying to come off as the good guys.

“The owners’ recent public announcement that the players had rejected their proposal of a 50% split also appears to be looking towards the future,” Sheehan said. “In particular, to go public with a private communication over contract negotiations suggests that the owners may be setting the stage to win over public opinion in the event that part or all of the season is lost.”

Great. Let’s hope that with the sides actually close they can find a middle ground. Because if games are canceled, both sides are likely to step back and dig in a little, then things could get really ugly.