NBA Prisoner's Dilemma

A little less than a year ago, the National Basketball Association was involved in an epic dispute between the players and the owners.  The owners wanted to impose a salary cap on the players in order to make their salaries more reasonable.  Before the dispute, the players had received more than 50% of the total income earned through basketball.  As the negotiations progressed, that number steadily decreased but did not descries enough for the owners to be satisfied.  The two sides could not reach an agreement in time to start the 2011-2012 season.  As a result, the first few weeks of the season were canceled and a lot of money was lost.  If the players and the owners had come to an agreement earlier, they would have been better off.  Yet both sides persisted and were adamant about keep that 2-3% of the money that was to be split between them.  This lockout was one of the worst in NBA history, as Mark Medina points out, mainly because of how stubborn the two sides were.

"If the owners honestly wanted to give a fair deal, they would've been satisfied with the $3 billion the players union already gave back through a 10-year period. If the union was honest with its negotiating power, it would've realized earlier that any further offers will only worsen."  

Both sides were trying to wait out the other, while coming to a mutual agreement would have been in their best interests.  This is an example of a prisoner's dilemma, the owners and the players being the two prisoners.  Both players in this game were trying to play their dominant strategy, resulting in a suboptimal outcome.  Although the players and owners eventually worked the 2011-2012 lockout out, it is foreseeable that this kind of dispute could happen again.  This situation justifies a constitution like document for the NBA, seeing as the two sides had such a difficult time coming to a voluntary arrangement.