Comments on: Sunk Costs and Sports Personnel Decisions

By: godfather

godfather — Sat, 19 Jan 2013 19:49:49 +0000

The length of contracts sought by MLB players in their pursuit of “security” has been absurd for a long time. Teams habitually grant pacts of seven years to players who are not really solid bets to be effective over that long a period; better teams would increase the per-year figure somewhat and shorten their gamble timewise. Even playing fantasy baseball, the hardest thing to do is to terminate a player who has cost dearly and produced little — the fear being that he might finally become the performer you had hoped for in the first place.

By: Wan Ihite

Wan Ihite — Sat, 19 Jan 2013 17:37:42 +0000

This isn’t a completely sunk cost, though, because right now they have a bad quarterback for “free” (i.e., for no additional expense), whereas if they brought in another one they would have to pay new money extra (so they’re paying the sunk cost AND the new guy’s salary). The NFL has a pretty hard salary cap is my understanding, so that extra new cost is a potentially significant sacrifice… which is only going to be worth it if the improvement in performance is considerable.

Think of it this way: If it costs you 5 M for the new guy, then it’s not a 5M QB, it’s moving from an 8.25M bad QB to 13.25M for a potentially upgraded QB. That’s a lot of money to lock up in one position in a hard salary cap world. OTOH, a team with a bad QB is pretty much hosed, so… yeah.

By: OGT

OGT — Sat, 19 Jan 2013 15:49:00 +0000

Hal- I don’t think that negotiating strategy in and of itself would be enough to produce winning results, if you are evaluating talent in the same way as your rivals you will merely end up underbidding them for the same talent, or paying more per year for a succession of mixed results.

By: Hal Baird

Hal Baird — Fri, 18 Jan 2013 19:00:16 +0000

Everyone in sports management is out looking for the next superstar and they’ll go to all extremes to lock him up long term. I think my policy would be nothing longer than a two season contract. There are many athletes who would refuse to play for a team under those circumstances, but in most cases they are a “bust” (Just to name three: DiPietro, Islanders; Sanchez, Jets; Rodriguez, Yankees). Make a player prove his worth in two years or don’t re-sign him. If a player proves himself offer another two year pact with an increase in salary. This would stop clubs from throwing good money after bad product.