The Winner's Curse

Discussion in 'The Business of Hockey' started by AlexandreDaigle, Dec 15, 2004.

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  1. AlexandreDaigle

    AlexandreDaigle Registered User

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    The article is about Oil and Baseball but it's just as relevent to Hockey.

    http://economics.about.com/cs/baseballeconomics/a/winners_curse_3.htm

    Is, among other passages, relevent.

    The point is that in a completely unregulated market with HIGHLY LIMITED resources available (ie. high level players) the GM who has the most optimistic, pie-in-the-sky evaluation of a player will tend to win the bidding. In sports particularly there is an additional problem: that overly optimsitc valuation is used as a wedge in arbitration hearings and free agency, and the prices seldom, if ever, come down signficantly from the established highs.

    This has been one of two factors behind an escalating price spiral (the other being an imbalance of resources which spurs a few teams to hyper competitiveness, and many of the rest to desperation). The NHL is not a free market in the sense that most things are.

    I'm astonished that anyone who has even a passing familiarity with the NFL and with MLB--- and who has witnessed the success of the former since adopting a cap and the struggles of the latter due to an overly rigid players union---- could be against the NOTION of a hard cap.

    The NHL's most recent proposal has some flaws, and I would certainly expect the players to seek further concessions, but in the longview, the best thing for the players union as a whole is to agree to some form of hard cap where they get over 50% of the total league revenues.

    It is equitable, it is fair, and it will help the league to regain it's status as a major sport in the American public's eyes, which in turn will bring in buckets of money to fill up pension funds for current players, and to pay the next generation.
     
    Last edited: Dec 15, 2004
  2. shveik

    shveik Registered User

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    It is an insightful view. Indeed the winner of an auction a lot of times overpays for his win. There are a few factors missing from the picture however:

    1. It doesn't work if there is only a few bidders with an overly optimistic view of the market. It takes the majority to set the market trend. And for every period when the players are overpaid (growth is overestimated by majority), there will be period when the players are underpaid (growth is underestimated by majority). NHL office was painting the rosy picture for a long time, fuelling it with expansion fees.

    2. This free market picture really only applies to UFAs in NHL. RFAs are bound to their team, so there is hardly any bidding involved.

    The reason *I* am skeptical about the cap, is because of the large differences in NHL markets. Revenue sizes are different, so you cannot hope to find one right cap size that fits all. Revenue sources are different, so the proposed tie between revenues and salaries is hard to define. Either way you look at it, a hard cap doesn't fit the NHL unless they equalize the markets by sharing most of the revenue like NFL does. But then again, the revenue sources are so different, that won't even work.
     
  3. Mess

    Mess Global Moderator

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    History has a habit of repeating itself ..

    If there is no NHL Season this year it will have done just that .. The last time there was no NHL season was 1919 .. That was the year the Boston Red Sox won the World Series .. That is of course until this year and we again could have no Hockey in the year that happens .. The curse of the Big Bambino may have moved to the NHL now ..
     
  4. quat

    quat winsome, loathsome

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    Curse of the Big Bambino.... hey..... in Vancouver, one of the radio guys calls Bertuzzi " Big Babe ".... which we all know is American, I mean English... er Canadian for Big Bambino.

    So, has Bertuzzi (fat man with stick), cursed the league by way of Babe Ruth (fat man with bat) ???

    I think the answer is obvious.


    Corn chips it is.

    (places tin foil hat back on head :dunce: )
     
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