Price for Talent is Relative to Marketplace

fans of the new york yankees often wonder why the team “lets” certain players sign with other teams, often at severe paycuts against what the player made while being a yankee. sometimes, the new player the yankees sign to replace the old (often a fan favorite) is lesser in talent and paid nearly the same money. well, a closer inspection shows why this is not odd at all. price for talent is relative to the marketplace.

baseball players, like employees at any job, won’t agree to take a paycut where performance hasn’t declined. the team’s priorities may have changed, but the player still produces. the player declines the reduced offer with the yankees out of principle and tries the open market. smaller markets (places where stadiums don’t sell out, where no branded entertainment network exists to augment income, etc) can’t bear the higher price tag. teams offer seemingly lesser deals that are actually favorable or inflated relative to their market. the player, feeling a little burned and now having lost interest from their former employer, feels good about the deal on the table (especially where the team is stretching to afford the player). on the other side, the yankees pursue a replacement at the price they were willing to pay all along. they evaluate what the player is worth in their market (again, this is higher than with the smaller market teams). they sign the new player for the budget they were willing to pay the fan favorite who’s left. look at the abreu, matsui and soon to be damon departures and how they played out. it’s almost the same situation each time.