Contract Renewal Incentive Effect

Abstract

The contract renewal incentive effect is an economic topic that has been controversial in the National Basketball Association (NBA). This study investigates whether or not the performance and effort of NBA players tend to increase in contract years and decrease afterward. With the most recent data set, this paper evaluates performance and effort variables, conducts multiple linear regressions, and presents discussions related to the real world. The results conclude that based on the reality-based metric, performance decreases by approximately 1.3 points and 0.7 points in contract years and post-contract years, respectively, while effort persists at the same level. From the perspective of basketball fans, this surprising finding provides a reference when understanding the world of basketball.