Wednesday, December 18, 2013
Oddities of the qualifying offer
This year, it's Kendrys Morales.
One unnamed GM told Peter Gammons that he “can’t see Morales signing until after the [June] draft,” when the compensation pick would disappear,
That's an interesting possibility.
Whatever a team values its draft pick, that's how much it's going to reduce Morales' salary. Think of it as the "release fee" like with Japan players. If it takes 52MM$ to get Darvish released from Japan, then the 110MM$ the Rangers were prepared to give him would get reduced by 52MM$ for the release fee, and 58MM$ goes as salary.?
Same applies here. How much does a team value the pick it will give up to get him? 5MM$? 10MM$? 20MM$? If Morales is looking for say 2/25 or 3/35 as completely unrestricted, then his salary will need to get reduced by the release fee. (Fangraphs Crowdsource results suggest he'd get 2/23, 3/31.)
How does he avoid the release fee? Well, he can sit out for two months, like Gammons is reporting. He loses one-third of his potential salary that first year. So, if he'd normally get say 12MM$ for 2014, he'd be giving up 4MM$ to ensure there is no release fee. In essence, the release fee is a trade of the compensation fee of the draft pick (valued at whatever, 5, 10, 20 or whatever a team values it at) for his sitting fee of 4MM$.
So, I can see why Gammons is reporting that Morales would deprive himself of 4MM$ by not signing right away, as that's the lowest penalty. Unless of course he goes back to the Mariners. But, since they know all this, they can offer him 4MM$ less than what he'd otherwise normally get. Or the Yankees would be giving up their 4th or 5th or whatever pick, and that's likely going to be worth less than 4MM$.
A very odd situation. Interestingly, had Morales (intentionally) hit worse than he did, say he was just league average, what would have happened? Well, he probably doesn't get the qualifying offer, but then... he would command less than he'd otherwise be worth based on his intentional true talent. Maybe in that case, he'd have gotten a 2/20 or 3/27 deal.
Basically, there was no way out for him. This is a system that the MLBPA helped design, and it was clear that players like this would get ensnared. It's clear, because ANY player that is right on the tier-line is the one that is most affected. This is why I don't like tier-ed setups, and rather prefer a sliding scale, so that the risk is spread.
Anyway, this is the kind of story that baseball economists like Matt Swartz must dream about.
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