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July 25, 2014

Skewed Left

The Mismatched Incentives of Draftees and Their Agents

by Zachary Levine


When the Astros last took us back to economics class, it was for what was generally regarded as a good thing on their end. They showed how a team can use not only their leverage, but the misaligned incentives of individual players and their collective to get what appeared to be a good deal for Jon Singleton. (Whether or not Singleton’s .179/.263/.340 start with a 37 percent strikeout rate changes your opinion of the deal now, the economics do not change.)

Now somehow, a month later, we’re back. It’s probably not a coincidence that it’s the Astros again. This is what they do. From the first pick of baseball’s new amateur economy, this is what they’ve done. They play with the rules, they use their leverage, and now they’re going to be one No. 1 overall draft pick short of a trio at Camp Kissimmee next year.

But in the mess of a negotiation that has left Brady Aiken an amateur, there is—beyond the player, the team and the union—a new agent in the picture that had not been considered in the game theory analysis of the Singleton situation. That agent is the agent. Or if we must, the advisor. We must? OK.

The agent was mentioned in the Singleton analysis, but he was mentioned as a factor that should be working both ways. The agent of an established player wants foremost to guarantee himself the payoff for the deal that he negotiates. The player could leave at any moment, and if you haven’t locked in the multi-year deal, you’re the one getting nothing. At the same time, the agent doesn’t have the same pressure to lock in life-changing money that the player does.

It’s this latter factor that complicates the Aiken story.

Assuming the reports of a $5 million signing bonus offer (roughly 37% below the pick’s slot value) are true, this amount, net of taxes and fees, is life-changing money for a 17-year-old. It would change the lives of 99.9 and then some more 9s percent of the people on this earth. The difference between $5 million and $8 million is so much smaller than the difference between even $5 million and $2 million and almost negligible compared to the difference between $5 million and $0 million.

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Related Content:  Draft,  Game Theory

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<< Previous Article
Premium Article Transaction Analysis: ... (07/25)
<< Previous Column
Skewed Left: What Is A... (07/15)
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Skewed Left: The Nomar... (07/31)
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Premium Article Notes from the Field: ... (07/25)

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