Mitigation of Perverse Incentives in Professional Sports Leagues with Reverse-Order Drafts.

Efficacy of industry policy implementation is enhanced when governments expedite resolution of private sector uncertainty. This study reinforces the mechanism through which production outcomes improve, via program evaluation analysis from professional sports. An alternative determination rule for allocating picks in reverse-order drafts-fewest games played when eliminated from playoffs-is considered in comparison with the current standard (fewest wins at end-of-season). Elimination timing is estimated via Monte Carlo simulation. Using MLB and NBA data from 2005-2013, results from a quasi-natural experiment show that when a team's perverse incentive to underperform is effectively removed prior to its final game of the season, its subsequent performance improves significantly. [ABSTRACT FROM AUTHOR]