Losing on Purpose: The Economics of NBA Tanking
A simulation study of tanking in the NBA · Mechanism Design
Why is losing<br>the right move?
Every year, NBA teams deliberately lose games. The draft rewards losing. We ran the math and simulated an NBA designed to stop it.
30<br>Teams simulated
50<br>Seasons per run
Mechanisms tested
Agent types
Scroll to learn how we stop tanking
About this study
Testing the debate, not just joining it
The NBA has adopted a new draft lottery mechanism, the 3-2-1 format, meant to reduce tanking incentives. Academics have proposed their own alternatives for decades. The league has tried reforms before. Everyone has a theory about what works. Almost no one has tested them against each other.
We ran 50 consecutive simulated NBA seasons under each of five mechanisms simultaneously, measuring how often strategic teams chose to lose deliberately and whether the draft was actually delivering picks to the teams that needed them most. Then we replaced every front office with an AI agent to see if the same incentive structures held under qualitative reasoning.
For the first time, the leading academic proposals and the NBA's own reforms are tested head to head in the same simulation framework.
What follows
How the draft works
The lottery turns losing games into a strategic choice
The value of a great pick
NBA 2K data puts a number on why pick 1 changes a franchise
The crossover point
The exact record at which losing becomes more valuable than winning
A season, decision by decision
One simulated team. 82 decisions. The exact moment the math flips.
Five proposed fixes
From COLA to 3-2-1, each mechanism targets the same problem differently
What we found
Tanking rates, draft fairness, and AI front offices, all five compared
Step 1
First, how does the NBA draft work?
The system
It's all about the… ping pong balls?
14 ping pong balls are numbered from 1–14. Before the draft, the league<br>pulls 4 of these balls at random and the team with the corresponding ticket<br>gets the pick.
One combination
This is one of 1,001 possible combinations
Draw 4 balls from 14 and you get a unique ordered set. There are exactly<br>1,001 ways to do it. The league provides all 16 non-playoff teams with a<br>set of these combinations. The worst teams hold hundreds but better teams<br>hold just a handful.
The full picture
More combinations, better odds. Simple enough.
That's the whole system. The worse your record, the more lottery<br>combinations you hold. Each square here represents 5 combinations.<br>The worst three teams, shown in red, hold more than 40% of all<br>combinations combined. Once teams figured that out, some started<br>losing on purpose.
The breakdown
The worst team sits at the top. The 17th sits at the bottom.
Combinations rearranged by NBA rank. The three worst teams hold the most, so their stacks are widest. From there, each slot gets fewer, until the 17th-ranked team barely registers.
Step 2
Why would a team want to lose?
One thing drives tanking: the value of a great pick. NBA 2K translates real player performance into numerical ratings. We use those ratings as a proxy for skill. The highest-rated players are the kind of franchise-altering talent that almost always goes first overall.
#1 PICK
Click to flip ↻
#10 PICK
Peak<br>First Season<br>Average
98
peak NBA 2K rating
The data
LeBron James. Pick #1, 2003. Peak NBA 2K rating: 99.
That bar is his peak NBA 2K overall rating. Use the buttons above to toggle between peak rating,<br>first-season rating, and career average. He wasn't the best player in the league from day one,<br>but he had the highest potential of his draft class. And he delivered.
The full picture
Now here's every lottery pick, averaged over 25 draft classes.
The bars show average NBA 2K ratings by pick position, from 2000 to 2024. Pick #1 averages 88 at peak: reliably elite, not always LeBron. The trend isn't perfectly smooth. Pick #3 historically outperforms pick #2. But the direction is clear: the top few picks offer a far higher chance of landing a franchise star.
The introduction of the lottery
Hakeem Olajuwon. Two championships.
Hakeem was the first pick in 1984. Houston won back-to-back titles with him.<br>He predates NBA 2K but he's the reason the lottery exists.<br>In 1984, the worst team got the best pick automatically. Houston, after losing to the Lakers, saw the incentive and tanked the rest of the season, knowing Hakeem would be available. The league instituted a lottery so no team could guarantee the top pick.
The lottery at work
Victor Wembanyama. Another generational talent.
The entire league knew Wembanyama would transform a franchise. Several teams positioned themselves accordingly. San Antonio finished with the second-worst record and won the top pick at 14% odds. Many others made questionable roster decisions in an obvious tank effort. They ended up with nothing to show for it.
Outliers exist
Steph Curry far exceeded expectations at the 7th...