The Value of Price's Option

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dhappy42

Straw Man
Oct 27, 2013
8,211
Michigan
The discussion of the value of the player-option in Price's contract with the Red Sox turned into a food fight in two other threads and one thread was shut down. The purpose of this thread is to rise above that... or to fly below the peas and mashed potatoes being flung in both directions. If you don't want to discuss the financial value of real options, don't participate in the thread. Also, (dhappy asks, probably in vain) please try to back up your opinions and analysis with reasoning and data.

How to value options is an interesting question, both with regard to Price's specific contract and baseball contracts in general. There's a fundamental principle in negotiations that deals and contracts are not a zero-sum game, i.e. the fact that something provides positive value to one side does not necessarily mean it takes away vale from the other. In fact, good negotiators try to find such areas of mutual benefit. In other words, smart negotiators try to trade things that are worth $10 to them, but $20 to the other side.

I will argue that Henry, et al, are good and smart negotiators very familiar with financial analysis and that their analysis found some team value in offering Price a player option. I don't know their assumptions about things such as Price's projected WAR, injury risk, age-related performance decline, etc., obviously, but can make my own, which will surely differ from theirs and yours.

I am interested in seeing and discussing your assumptions and analysis, which are in themselves based on opinions. But again, if you just want to call people who disagree with your assumptions and opinions "stupid," I ask that you do it somewhere else. Is that a naive SOSH rookie plea or what?
 

dcmissle

Deflatigator
Lifetime Member
SoSH Member
Aug 4, 2005
28,269
It is a counter-factual plea. No support has emerged to date to support your thesis that "their analysis found some team value" in the option. Instead, it has been reported that the option was Price's demand, which the RS would have preferred not to honor. And this squares with another report posted in the Price thread this morning that they sized him up a pitcher who might escape mid-30s downturn. So the common sense conclusion is that the team value of the option expired once they got his signature on the contract.

Discussion is fine. Just don't pretend the RS sized this up as you do when there is no evidence for that proposition, at least to date.
 
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