First-round holdouts
Craig Newmark and John Palmer analyze Gregg Easterbrook's claim that first-round draft choices who hold out cost themselves lots of money by putting themselves behind the curve in competing for spots on the team. Newmark gives a couple of possible explanations why Easterbrook might be wrong, the first of which I agree with; Palmer suggests why the players may not be acting rationally. (Newmark's second reason may apply to agents, but I don't think players have a sufficient number of opportunities to benefit from being a repeat player in the bargaining game.)
But Palmer's explanation—that the players are being big-headed because their retinue of yes-men punish anyone who tells the player "no"—doesn't explain why the teams may not be acting rationally. There's a large opportunity cost in making a first-round pick; one could have traded the pick for an established player. The importance of the pick is illustrated by the fact that the Minnesota Vikings were crippled for years when they traded three first-round picks to get the past-his-prime Herschel Walker from the Dallas Cowboys, while the Cowboys' picks ended up winning three Super Bowls in four years.
I think Easterbrook is wrong, and camp is not as important for players' careers as avoiding injury in camp is. If teams, knowing the importance of camp, low-ball a player, the player can either hold out, sign a low-ball deal, or go to camp without a deal and risk career-ending injury. The risk of career-ending injury is not small. The risk of career-ending poor camp performance is not terribly small, either. In such a circumstance, the players are going to hold out, and, with backwards induction, the team knows the player is going to hold out—so why lowball the player if doing so is so damaging to the team's capital investment in the draft pick?
What percentage of players who show up to camp early only sign one contract in their lives? What percentage never collect more than the signing bonus? I think these two numbers present a high enough percentage that players aren't hurting their careers that much by holding out, especially when agents collectively hold out every first-round pick, as has happened this year. There's anecdotal evidence on both sides, and it's worth empirical exploration.
But Palmer's explanation—that the players are being big-headed because their retinue of yes-men punish anyone who tells the player "no"—doesn't explain why the teams may not be acting rationally. There's a large opportunity cost in making a first-round pick; one could have traded the pick for an established player. The importance of the pick is illustrated by the fact that the Minnesota Vikings were crippled for years when they traded three first-round picks to get the past-his-prime Herschel Walker from the Dallas Cowboys, while the Cowboys' picks ended up winning three Super Bowls in four years.
I think Easterbrook is wrong, and camp is not as important for players' careers as avoiding injury in camp is. If teams, knowing the importance of camp, low-ball a player, the player can either hold out, sign a low-ball deal, or go to camp without a deal and risk career-ending injury. The risk of career-ending injury is not small. The risk of career-ending poor camp performance is not terribly small, either. In such a circumstance, the players are going to hold out, and, with backwards induction, the team knows the player is going to hold out—so why lowball the player if doing so is so damaging to the team's capital investment in the draft pick?
What percentage of players who show up to camp early only sign one contract in their lives? What percentage never collect more than the signing bonus? I think these two numbers present a high enough percentage that players aren't hurting their careers that much by holding out, especially when agents collectively hold out every first-round pick, as has happened this year. There's anecdotal evidence on both sides, and it's worth empirical exploration.