This paper analyses the link between relative market value of representative subsets of athletes in the National Basketball
Association (NBA) and individual wages. NBA athletes are categorised with respect to multiple performance characteristics
utilising the k-means algorithm to cluster observations and a group's market value is calculated by averaging real annual
salaries. Employing GMM estimation techniques to a dynamic wage equation, we find a statistically significant and positive
effect of one-period lagged relative market value of an athletess representative cluster on individual wages after controlling
for past individual performance. This finding is consistent with the theory of prototype heuristic, introduced by Kahneman
and Frederick (2002), that NBA teams' judgement about an athlete's future performance is based on a comparison of the player
to a prototype group consisting of other but comparable athletes.
Forschungsbereich:Industrie-, Innovations- und internationale Ökonomie