Sports, Selfishness, and the “Winner’s Discount”


This one is a little off-topic, although I think it deals with a lot of useful economic concepts.  I also happen to be a huge hockey fan, a sport which just recently went through a lot of free-agent signings, prompting debates over these issues.

Most people recognize that sports leagues are structured in a way to ensure parity and competitiveness.  Ideally, every team in the league, if it is managed well, coached well, and the players perform well, should be able to win a championship.  In pursuit of this goal, rules are often instituted to help establish parity, such as the worst team in the league receiving the top draft pick, or the institution of a salary cap.  One other way that teams at the bottom of the league can attempt to improve is through free agency.  At the end of their current contract, players become “free agents” and are free to negotiate terms and sign with any team of their choosing.  Through this mechanism, a bad team with a strong desire to improve can offer lucrative contracts to the top free agents, thus improving their team and restoring competitive balance to the league at the same time.

Of course, we must keep in mind that players are human beings, and as such, have a wide variety of preferences and motivations.  Some may choose to play for whichever team offers them the most money.  Others may value consistency and choose to stay with the same team they currently play with.  Others may be primarily motivated by the desire to play for a good team, and refuse to entertain offers from teams who have performed poorly for several years.  The extent to which a player is willing to sacrifice salary in order to satisfy other, less tangible preferences is commonly referred to as a “discount.”  Players who accept slightly less than the market value for their services to stay with their current team are considered to be giving a “hometown discount” to the team.  Likewise, players who accept less than the market value for their services to sign with a successful top-performing team in the hopes of winning a championship are said to be giving a “winner’s discount.”

For various reasons (one might suspect the creeping influence of socialism in popular culture, demonizing the profit motive and scorning wealth in general), players who choose to sign with the team that will offer them the most money are generally characterized as selfish.  They are said to have “taken the money,” with the strong implication being that such an act is greedy and harmful in some way.  Meanwhile, players who accept less money to stay where they are, or sign with an already-good team are thought of as virtuous or heroic.  Players who offer the “winner’s discount” are praised as un-selfish, despite the fact that this player is being just as selfish as the one who takes the money.  They merely have different priorities.  Both the player who signs with a bad team for a lot of money and the player who signs with a good team for well under his market value are attempting to satisfy their most urgent desires.  It just so happens that their most urgent desires are different.  A player does not sign with a great team for less than market value out of some sense of altruism or charity, but rather, they do so because they want to be known as a player that won a championship.  This is at least as selfish as a player signing with whichever team offers the most money.

In fact, my position is that the “winner’s discount” is actually more selfish, as it negatively impacts the competitive balance of the league.  Accepting less than the market value for their services means that players distort the free agent market.  Offering a “winner’s discount” makes it more likely that the best teams will stay at the top of the league, and makes it that much more difficult for the teams at the bottom to improve (in fact, under this same logic, teams who are very bad, or have been bad for a long time, often have to pay essentially a “loser’s premium,” offering greater than market value to attract quality free agents).  As a hockey fan, I would prefer a league that is very competitive, where every team is capable of winning a championship in any given year, and any team can beat any other team on any given night.  A highly competitive league benefits the fans.  Keeping that in mind, players who “take the money” are certainly doing their part to keep the league competitive.  While they also didn’t act out of charity (an individual player has no obligation to make career decisions for my benefit), their actions still provide spillover benefits to me, keeping the league competitive, and increasing my enjoyment of the game.

On the other hand, players who take the “winner’s discount,” or otherwise distort the free agent market, are making the league less competitive, thereby serving to lower the quality of the product for the fans, and harming the league as a whole.  Don’t get me wrong here; I am not judging anyone’s particular values or preferences.  Every player has every right to sign with whichever team they choose for any reason they choose.  But I’m tired of hearing the sports media worshipping the selfish players who distort the market by offering a “winner’s discount” and vilifying the selfish players whose actions serve to benefit the fans by “taking the money.”

Ultimately, I think this entire issue comes down to a bizarre cultural phenomenon, where desiring money is considered selfish and immoral, but desiring anything else is considered positive and virtuous, completely regardless of what the effects of those desires will be.  The culture has this completely backwards.  Since “taking the money” confers tangential benefits onto the fans, it is the least selfish thing a player can do.  The truly selfish players are the ones who lower the quality of the product in order to pursue their own ends.  Keep this in mind the next time you hear the sports media heaping praise on a player who was “willing to take less money,” for whatever reason.

About Dude Where's My Freedom?

My name's Matt and I love Freedom.
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