Abstract
The National Football League instituted the reverse order draft for entering players (rookies) in 1936. The NFL system is the original version of a player entry draft, and subsequent draft systems developed by North American team sport leagues are based on this model. The draft determines the initial contract assignment for (most) entering players. The entry draft creates a monopsony situation whereby the player may bargain only with one potential employer. Negotiation leverage for entering players is greatly reduced, and theoretically the monopsony (single buyer) model restrains salaries. As with most restrictions limiting labor mobility, the NFL draft was initially promoted as a tool to remedy competitive imbalance, and has since been defended as necessary to maintain competitive balance. Although the effect of the draft on competitive balance is ambiguous at best, the elimination of a competitive labor market and bargaining power for entering players’ services accomplishes the league’s objective of eliminating bidding competition and quite clearly reduces salaries. Notwithstanding, the very best entering players, the top draft choices, may also possess significant bargaining power. Contract negotiations in these circumstances may reflect a bilateral monopoly outcome where negotiated salaries compare to a competitive market result.
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Notes
- 1.
Through its first decade the NFL was comprised of many clubs in small and midsized cities. Carr’s strategy was to build a league of large market teams and his policies included selective punishment for clubs violating this policy reflected this objective (Coenen 2005).
- 2.
During the war, the NFL voted to stop using the term “draft” and referred to players as being on the “preferred negotiations list” (Campbell 1985).
- 3.
Per antitrust law, Smith was awarded treble damages of $2,76,000. The ruling did not open the door to other antitrust challenges to the draft as by the time the appeals process was exhausted in 1978, the draft was established in the CBA and immune from further antitrust scrutiny.
- 4.
Elway had additional leverage in that he was already playing professional baseball and under contract with New York Yankees.
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Maxcy, J. (2012). Economics of the NFL Player Entry Draft System. In: Quinn, K. (eds) The Economics of the National Football League. Sports Economics, Management and Policy, vol 2. Springer, New York, NY. https://doi.org/10.1007/978-1-4419-6290-4_10
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