The highly anticipated National Football League Draft begins tomorrow evening (4/22/10) and, for the first time, will be televised during prime time on ESPN and NFL Network. This is the NFL’s most important off-season event and followed closely by fans around the world. But, two scholars suggest the process is flawed because teams significantly overvalue early draft picks.
Richard Thaler’s (Booth School of Business, University of Chicago) recent New York Times’ article takes a look at how the NFL draft works, specifically giving underdog teams earlier picks to improve their ranks and win games. Yet, he writes, “We found that the teams choosing early in the draft generally don’t, in fact, get the players that provide the most value per dollar.”
He and Cade Massey (Yale School of Management) recently revised their paper “The Loser’s Curse: Overconfidence vs. Market Efficiency in the National Football League Draft” that says late first-round picks actually generate more value than early first-round picks. Download the paper from SSRN.com: The Loser’s Curse.