Abstract

This paper examines how the performance of players affects their salaries within the NBA and how this relationship has changed over time. Specifically, the main question that this research seeks to answer is: to what extent does the performance of players affect the salaries of NBA players, and has this relationship become stronger over time? My hypothesis is that after the introduction of free agency in 1976, the performance of players became more important in determining player salaries. This is due to the increased mobility of players and the reduction in the monopsony power that teams had over players. Additionally, the improvements in technology only furthered this shift. To test this hypothesis, I used player data from both the 2012–2014 and 2022–2024 NBA seasons to compare the effect of performance on salaries. More specifically, I used regression models to compare the impact of performance on salaries using the natural log of salary. The results show that performance has a significant effect on salaries. Additionally, the coefficient for Win Shares is much larger than for Player Efficiency Rating, indicating that Win Shares has a stronger impact on salaries over time. Moreover, the impact of performance is stronger for players in new contracts. Overall, the results support my hypothesis that the NBA league is becoming more competitive and that players’ salaries are reflecting their value to the teams. Both free agency and technology have contributed to this shift in the league

Advisor

Long, Melanie

Department

Economics

Publication Date

2026

Degree Granted

Bachelor of Arts

Document Type

Senior Independent Study Thesis

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© Copyright 2026 Harry Kipchirchir Koech