JavAudibles: "Dollar Bills"

1:41 AM, Jul 15, 2013   |    comments
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Sports economics requires a bottle of Advil and a chaser.

That's why I bought "Economics for Dummies" in high school. (I'm still a dummy, but at least I'm a dummy who knows a few basic principles.)

Anyway, we're here to discuss the case of: Jairus Byrd vs. the Buffalo Bills payroll.

This analysis will be a form Game Theory (the study of strategic decision making between two parties).

On one side, you have Pro Bowl safety Jairus Byrd. On the other, you have the Bills front office -General Manager Doug Whaley and President & CEO Russ Brandon.

Quick Recap: The Bills franchise tagged Byrd in March. Since then, the team and Byrd (mostly his agent Eugene Parker) have been "negotiating" a long term deal. Byrd wants "Eric Weddle" money. If no long-term deal is reached by Monday, July 15 at 4 p.m., negotiations end and Byrd can sign a one-year tender (worth $6.9 million), or he can hold out. (He still has to sign the tender, by the way.)

Point is: A handful of millions separate Jairus Byrd's future in Buffalo.

Still with me? Alright, let's go to school.
These are a few simple economic principles and how they relate to the Byrd vs. Bills saga.

Supply & Demand: Demand = want; Supply = what is wanted. In this analogy, NFL teams have demand and the NFL safeties are the supply. There are not many reliable, consistent safeties in NFL- meaning they're in low supply. NFL teams need elite safeties- meaning the position is in high demand. When high demand meets low supply, the product's value increases (Byrd).

Inelastic Good: There is always a demand for great football players, regardless of position. In this scenario, those players are called inelastic goods. There will always be a market for them. Byrd was a Pro Bowler last season. He's a great football player. He's an inelastic good.

Cost-Benefit Analysis: Teams weight costs and benefits to all personnel moves. Is the production (benefit) worth the price (cost)? Byrd led the AFC in interceptions and forced fumbles last year. He's productive, but with no long term deal in place, Bills must not believe he's worth the asking price. This is the central issue in this negotiation.

Inflation: When it comes to determining price, agents look at similar transactions made by players at the same position. Chargers safety Eric Weddle signed a 5-year contract worth $40 million. Reports say Byrd wants a Weddle-type contract. Agents do this all the time. They see a player of similar caliber get a big contract and then choose a figure based on the "market value." Problem is, when one team overpays for a player at a certain position, others tend to follow suit. This creates inflation in the marketplace. You see this all the time in pro sports, but it's not like the owner's are going poor. Football is still a business, no matter how much we pretend it's not.

*Another point about inflation:
A dollar now is worth more than a dollar in the future. If the Bills ever do agree to a long-term deal with Byrd, their best bet is to backload his contract. Pay him less while the value of the dollar is higher than later in the contract. Plus, if his production plummets, they can dump his contract or trade him.

Opportunity Cost:
Finally, one of my favorite principles in economics. Opportunity cost is what you give up to acquire something else. In this scenario, the Bills get nothing. They waste time negotiating and still haven't inked Byrd to a long-term contract. By not getting a deal done, Byrd was not present at voluntary OTAs or the mandatory mini-camp. (He was not fined for missing mini-camp because he hasn't signed the 1-year tender, yet.) With a new coach and defensive coordinator, you want your star players at practice and training camp. If Byrd holds out, the setback grows larger.

Thanks for reading. Dummy, out.

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