Carry-Over Lottery Allocation: Practical Incentive-Compatible Drafts

The NBA Draft lottery is designed to promote competitive balance by awarding better draft positions to weaker teams, but it creates incentives to deliberately lose, a practice known as tanking. We propose a draft mechanism that is simultaneously practical, incentive-compatible, and advantages weaker teams. The Carry-Over Lottery Allocation (COLA) Draft Mechanism represents a paradigm shift in evaluating team quality, replacing a single season's standings with playoff outcomes over multiple years. COLA uses a draft lottery where every non-playoff team receives the same number of lottery tickets, removing incentives to lose additional games after elimination. Lottery tickets that do not win a top draft pick carry over to future lotteries, while playoff success or winning a top pick diminishes a team's accumulated tickets. Over time, COLA rewards teams with poor long-term performance and less prior draft assistance. By retaining the lottery format, COLA preserves transparency and fan engagement. Real-world implementation challenges are addressed to demonstrate feasibility, including transitioning from the current system, handling traded draft picks, and accommodating draft classes of varying strength. The most significant challenge occurs in years with exceptionally strong draft classes, where teams may prefer missing the playoffs in order to gain lottery access, violating a foundational assumption: that teams prefer playoff success to lottery participation. We provide a solution to this problem, employing a truth-elicitation mechanism to identify such years and expand lottery eligibility to include as many playoff teams as necessary to preserve anti-tanking incentives.