Market Efficiency and the Setting of Salaries for NBA Daily Fantasy on FanDuel and Draft Kings

Abstract

The market for daily fantasy sports for the NBA is examined with respect to efficiency when pricing player salaries for the games.  Simple factors such as home court advantage, rest, and opponent are shown to significantly effect performance beyond posted salaries in the respective markets.  In addition, a “hot hand” effect is found in that players that exceed expectations in previous games are shown to outperform salary-based expectations in the next contest.  These factors yield a rejection of market efficiency as it relates to salaries in the marketplace.  Legal ramifications for these contests as games of skill are examined.