Seduction of 'donut contracts' has MLB players leaving millions on table

[redseat]

http://sports.yahoo.com/news/seduction-of--donut-contracts--has-mlb-players-leaving-millions-on-table-043829125.html


At one of the annual meetings of baseball agents this offseason, an official from the Major League Baseball Players Association tried to emphasize just how pervasive the trend of players accepting multiple club options on long-term extensions had gotten. If he worked for a team, he said, he would offer a player a deal with six club options, because he was sure someone in the room would take it.

Some chuckled. Others seethed. Ceding ground to teams in contract negotiations has become a massive issue for the union, which must balance the reality of its situation – suggesting, in many cases, a player turn down tens of millions of dollars – with the reality that doing so often is an exceedingly difficult proposition.

In a vacuum, the issue gets a big, fat #richpeopleproblems hashtag. If the MLBPA's biggest problems revolve around a guy not getting enough millions, whooptie damn do. At the same time, that ignores an important principle, and one the union is stressing as long-term deals swing more and more in favor of teams: Baseball is a $9 billion industry, and every dollar that doesn't go to the players who make the game what it is funnels straight into the suit pockets of owners who are getting even more stinking rich with every successful long-term deal.

 

[Darkstone42]

I understand the sentiment of the union, but there are a couple major factors to consider when talking about these sorts of deals.

The first is the idea of nonlinear utility. Those extra $10 million are not worth as much to someone who is already a multimillionaire in terms of his ability to enjoy it. To some players, those millions matter. Others don't really care.

The second is the idea of job security. Above all else, most of these guys just want to play baseball. Sure, they'll try to get the best contracts they can in general, but the ultimate goal is to play. Signing a deal which increases the likelihood they play every year for a decade is likely very appealing to them. While, overall, they are conceding too much money to cover their injury risk, because, yes, these deals usually do favor the team, no individual player can be entirely certain about his eventual injury situation. Statistically, the risk is worthwhile. To each individual it might not be.

And that point returns to nonlinear utility, of course. Those extra millions may not be worth the risk of holding out because those extra millions are so much less important than the first several.

Of course, this is also the case for the owners, who need those millions even less. The ideal case would be to reinvest those millions in the fan experience, since we, as the poorest entities, stand to gain the most from that investment.

 

[packerzrule]

Damn. I thought this story was about donuts!!!

 

[redseat]

Haha- yeah that's how I got roped into reading the article in the first place myself Pack!