Carry-Over Lottery Allocation: Practical Incentive-Compatible Drafts
Timothy Highley, Tannah Duncan, Ilia Volkov
TL;DR
This paper tackles tanking in the NBA draft by proposing the Carry-Over Lottery Allocation COLA mechanism, a practical and incentive-compatible system that rewards teams based on multi-year playoff performance rather than single-season records. COLA gives non-playoff teams equal annual lottery tickets, carries over unused tickets, and diminishes tickets when a top pick is won or when playoff success occurs, with $α$ set to 1000 to maintain interpretability. To handle exceptionally strong draft years, the authors introduce a truth-elicitation approach using Robust Bayesian Truth Serum RBTS to determine when to expand lottery eligibility while preserving anti-tanking incentives. Simulation studies indicate COLA prevents permanent dominance and allows weaker teams to improve over time, while maintaining fan engagement through a familiar lottery format and robust handling of traded picks, opt-out options, and strong vs weak draft classes.
Abstract
The NBA Draft lottery is designed to promote competitive balance by awarding better draft positions to weaker teams, but it creates incentives to deliberately lose, a practice known as tanking. We propose a draft mechanism that is simultaneously practical, incentive-compatible, and advantages weaker teams. The \textbf{Carry-Over Lottery Allocation (COLA) Draft Mechanism} represents a paradigm shift in evaluating team quality, replacing a single season's standings with playoff outcomes over multiple years. COLA uses a draft lottery where every non-playoff team receives the same number of lottery tickets, removing incentives to lose additional games after elimination. Lottery tickets that do not win a top draft pick carry over to future lotteries, while playoff success or winning a top pick diminishes a team's accumulated tickets. Over time, COLA rewards teams with poor long-term performance and less prior draft assistance. By retaining the lottery format, COLA preserves transparency and fan engagement. Real-world implementation challenges are addressed to demonstrate feasibility, including transitioning from the current system, handling traded draft picks, and accommodating draft classes of varying strength. The most significant challenge occurs in years with exceptionally strong draft classes, where teams may prefer missing the playoffs in order to gain lottery access, violating a foundational assumption: that teams prefer playoff success to lottery participation. We provide a solution to this problem, employing a truth-elicitation mechanism to identify such years and expand lottery eligibility to include as many playoff teams as necessary to preserve anti-tanking incentives.