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AEM414 - problem set 3_Essay

AEM414 - problem set 3_Essay - Assignment 3 A...

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Assignment 3 A record-setting contract for the ages: The arena of professional sports has always created opportunities for the media and for capitalists, playing host to some of the most well-known and talented athletes throughout the world. During the last twenty years or so, aspects of this industry were taken to a level unprecedented and unreasonable in the eyes of many onlookers. Due to the enormous amount of money pouring into the stadiums and franchises, the contracts for professional athletes, which always seemed relatively high compared to the amount of work being preformed, have recently begun to involve astronomical figures, beyond most people’s wildest imaginations. For a handful of people, however, theses figures have become common place and seemingly limitless. One particular athlete, that has been portrayed feverishly and incessantly in the media during that past month or so is currently in the finalizing stages of an agreement that will allow him to maintain his place in sporting history, beyond his statistics and records, as the single being with the most guaranteed dollars to date. According to CNBC’s “The Biggest Contracts in American Sports,” Alex Rodriguez tops the list on which he was already number 1. In 2001 he set the record with a ten year, 250 million dollar deal. He was not finished, however, and “if the initial reports are true, this week A-Rod could set a new record for being the highest paid professional athlete... ever,” looking at a contract for 275 million dollars over ten years (CNBC). Behind this contact deal are the subtle workings of a number of behavioral economic factors that will be discussed presently. The situation that the New York Yankees were expecting to find themselves in prior to this seemingly finished deal was a first price auction, where teams throughout major league baseball could and would be placing bids to hold the next contract of Alex Rodriguez, and
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hypothetically, the highest bid would win the prize. Now this process is typically an extremely expensive one, especially in the case of professional athletes. The intrinsic value of a player to a
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  • Fall '08
  • Major League Baseball, new york yankees, Alex Rodriguez, Boston Red Sox, Major League Baseball Most Valuable Player Award, Reggie Jackson

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AEM414 - problem set 3_Essay - Assignment 3 A...

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