Tuesday, July 09, 2013
Value of non-guaranteed contract
People make a big deal that MLB has guaranteed contracts. But, this comes at a price. Suppose that the CBA allowed for teams and players to determine how much contracts are guaranteed if at all, on one-by-one basis. The Phillies signed Cliff Lee to a 5/120 deal, guaranteed. But, what if the Phillies had the right to walk away after each year. How would Cliff Lee's contract have looked like? Well, instead of signing 5/120, he might have signed a 5/150 deal. Or, what if in allowing the Phillies to walk away, they had to pay two-thirds of the remaining value of the contract? Well, now, Lee might have signed a 5/130 deal.? And if it was one-third of the remaining value? Maybe it would be a 5/140 deal. (All numbers for illustration purposes only.)
The point is that there's a premium the player pays in order to get that guaranteed contract. It's not a cost-less benefit. Tyler exemplifies this point tremendously with this illustration.
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