Dollars and Jens
Tuesday, August 16, 2005
negotiations / game theory
In an article about a baseball player who hit for the cycle, this caught my attention:
Under the mutual option on his 2006 contract, the Giants can elect to keep him for $5 million. If they decline, Winn can elect to stay for $3.75 million or become a free agent.Of course, if the Giants think he would elect to stay, it is in their interest to decline their option on him, even if they want to keep him; accordingly, it is in his interest to make it appear he doesn't wish to stay.
I think it would have been interesting to have him write down a number, no more than 5,000,000, and the Giants write down a number, no less than 3,750,000; he would play for a salary equal to the average of the two numbers if the Giants' number was greater than or equal to his, and he would be released if their number was lower than his. This situation is a bit more symmetric, but may be more prone to breakdown; as the contract was actually written, one side (Winn) is ultimately left to choose whether to take the contract or not, at which point further bluffing won't work. It might be that my technique would be more likely to see each side pushing for too much, and him leaving, even if both sides wanted him to stay.