from Amazon
Thursday, May 27, 2010
The greatest game of chicken ever
J Cross:
Why doesn’t a guy like Strasburg or Bryce Harper put a little game theory to work when negotiating their contract?
Everyone knows that the best way to win a game of chicken is to blindfold yourself and throw the steering wheel out the window. The other driver has no choice but to swerve.
So, why doesn’t Bryce Harper publicly sign a contract with a third party promising to pay them the entirely of his signing bonus should he sign for a penny less than $20MM. Now he has no incentive to sign for less than $20MM and a team that doesn’t want to pay $20MM for him has no incentive to draft him. Is this forbidden somehow?
I love it. To make it a legal transaction, Harper probably has to be paid. Basically, Harper is selling an option on himself. Goldman Sachs gives Bryce Harper 100 bucks. If Harper signs for less than 20MM$, Harper gives the entire signing bonus to Goldman Sachs. If Harper signs for at least 20MM$, Harper keeps the 20MM$, plus the 100 bucks. If Harper doesn’t sign at all, he gives back the 100 bucks.
Beautiful. Now, it’s just a matter of which company wants the free advertising, what threshhold levels to choose, and how much J Cross should get for thinking up the idea.
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