Chandrakumaran, Jemuel Nilukshan (2024) Economics of the Australian Football League Draft. PhD thesis, Victoria University.

Abstract

The Australian Football League (AFL) has utilised a draft system since 1986, to equitably allocate amateur talent amongst teams. Yet, given its complexity, many have questioned its usability from a team’s perspective and its overall effectiveness in general. The overarching aim of this thesis is to develop an alternative model to value picks, players and future contracts within the AFL national player draft while analysing the effectiveness of the mechanism itself. To this effect, the first two studies proposed the use of post selection performance metrics to determine the value of draft picks, both in the current and future years whilst also equating them to value active players. This enabled the understanding behind the year-on-year performance of draftees in study three, which validated the request of teams to retain players for a longer period in order to recoup their investments. Instead of arbitrarily increasing contract lengths, the same study proposed the adoption of call options allowing teams to hedge against the upside potential in salary increases and guarantee players a reasonable package early on. Whilst these studies together provide the alternative model intended from this thesis, the second portion of its aim is to evaluate the draft itself in the absence of the former. Whilst the first two studies did show deviations between market and performance-based pick values, study four showed a draftee’s post-selection performance remained in-line with the pick number used to select them, even when the picks were exchanged between teams prior to them being exercised. Yet, study five discovered a disparity in draftee retention if the pick used to select them was traded beforehand, as teams ride their investments into those picks driven by their misjudgement of value. This was made evident in the behaviour of teams intentionally losing games to obtain priority selections early on in the draft, as shown in study six. Hence, it is expected that through the adoption of the first part of this work, the league should be able to mitigate the behaviours portrayed in the second half. It is expected that this will provide information for teams to make decisions on picks and trades, and aid players to inform their personal interests and career prospects. Leading on, the thesis will extend the current knowledge by examining player performance in relation to draft pick allocation, together with overall team outcomes and examine the potential for the draft to create perverse incentives. Though this study examines these concepts in relation to the AFL, it is expected that the findings could be extrapolated in similar leagues.

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