BRIEF RESEARCH REPORT article
Front. Sports Act. Living
Sec. Sports Management, Marketing, and Economics
Volume 7 - 2025 | doi: 10.3389/fspor.2025.1625458
This article is part of the Research TopicEvolving Economies in Sports: Management Practices and Market ImpactsView all 3 articles
Violating the Salary Cap: Exploring Performance Gains in the National Basketball Association
Provisionally accepted
- Menlo College, Atherton, United States
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Salary caps, which act as price ceilings for teams on the cost of players, are commonplace in various North American professional sports leagues. Although some leagues have "hard" caps that teams cannot surpass (e.g., the National Football League), the National Basketball Association (NBA) utilizes a more flexible framework known as a "soft" cap, where the cap can be exceeded by paying a luxury tax, or penalty fee. Thus, teams can choose to optimize player salaries within the cap or strategically exceed it, if the marginal benefits outweigh the cost of the luxury tax. The purpose of the current study is to determine if violating the salary cap in the NBA warrants the financial burden associated with the luxury tax. Salary cap data spanning the 2011-12 to 2023-24 NBA seasons were collected from Spotrac, while team performance data were obtained from Basketball-Reference. Using each team's estimated luxury tax bill, we categorized teams into either those that violate the cap (violators) or those that do not (non-violators) based on each season. On-court performance and playoff status (playoff vs. non-playoff team) are compared using a series of mixed-effects models with random effects for team and season controlling for market size, operationalized using the population of the Census-defined metropolitan area, and the roster's average age. We test the hypothesis that paying for more expensive rosters justifies financial fines for violating the salary cap due to the ensuing improvement in team performance.
Keywords: Salary cap, Luxury tax, Professional basketball, team performance, roster construction
Received: 09 May 2025; Accepted: 03 Jul 2025.
Copyright: © 2025 Pradhan and Leshchinskii. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
* Correspondence: Sean Pradhan, Menlo College, Atherton, United States
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