HolyMoses

Ricardo Allen's New Deal, Risk Transfer, and the Policy of Signing Players a season before free agency?

18 posts in this topic

The Falcons do this a lot (not sure about other teams.)  It would seem that players would want to get paid the (typically fat) final year of their current contract then hit the free agent market.  Basic Economics predicts that a player will maximize his earning if he is negotiating with 32 teams instead of one.  When they sign early, they are giving the home team a discount.

On the other hand, the Falcons absorb the risk of a player who just signed a long term deal getting hurt and not performing up to his contract.  Why would they take that risk?

And therein lies the answer.  "Insurance is paying a premium for an unaffordable risk."  The risk is a performance impeding injury (or salary impeding injury for the player).   The player is not in a position to absorb the risk.  The opportunity cost of injury to that one player is astronomical.  So the risk to the player in unaffordable.  Therefore, the player transfers that risk to the ownder, and the premium paid for that risk transfer is the discount the team earns off of the player's free market value.

The team has the resources to absorb the risk.  The opportunity cost is a player that does not perform to the same level as the injured player, but that risk is present for every man on the roster. 

If teams wait until March 13, or whatever the final date teams can re-sign their players approaching free agency, they lose their negotiating leverage that is risk transfer.  The player no long has an injury risk, so has no reason to give the team a discount for the transfer of that risk.

I wonder if it would be cost effective for a player to pay insurance premiums on the last year of the contract?  College players take out similar policies all the time.  As experts in risk transfer, it seems like a player's premium would be less expensive than the lost salary from not reaching free agency.

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Depending on a player's contract i.e., Schweitzer-Neal.

Neal could afford to place some $ in some type of low-risk investment to help mitigate the financial cost of season/career ending injury. Likewise with Matthews, prior to his extension.

The premiums on a policy that you described would be too high for the majority of NFL players on their first un-extended  contract I bet.

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To fully or nearly fully insure the value of a starter players contract in their penultimate contract year v. likelihood of an injury would be very expensive. So much so that any increased value from waiting until the free agency year for a larger contract would be overtaken by the cost of that policy.

A player’s agent should get as much guaranteed money as necessary to “pay the bills” on his client’s essentials - home, cars, kid’s college funds and trusts, and then let the rest be unsecured gravy.

 

 

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On 8/7/2018 at 4:05 PM, HolyMoses said:

The Falcons do this a lot (not sure about other teams.)  It would seem that players would want to get paid the (typically fat) final year of their current contract then hit the free agent market.  Basic Economics predicts that a player will maximize his earning if he is negotiating with 32 teams instead of one.  When they sign early, they are giving the home team a discount.

On the other hand, the Falcons absorb the risk of a player who just signed a long term deal getting hurt and not performing up to his contract.  Why would they take that risk?

And therein lies the answer.  "Insurance is paying a premium for an unaffordable risk."  The risk is a performance impeding injury (or salary impeding injury for the player).   The player is not in a position to absorb the risk.  The opportunity cost of injury to that one player is astronomical.  So the risk to the player in unaffordable.  Therefore, the player transfers that risk to the ownder, and the premium paid for that risk transfer is the discount the team earns off of the player's free market value.

The team has the resources to absorb the risk.  The opportunity cost is a player that does not perform to the same level as the injured player, but that risk is present for every man on the roster. 

If teams wait until March 13, or whatever the final date teams can re-sign their players approaching free agency, they lose their negotiating leverage that is risk transfer.  The player no long has an injury risk, so has no reason to give the team a discount for the transfer of that risk.

I wonder if it would be cost effective for a player to pay insurance premiums on the last year of the contract?  College players take out similar policies all the time.  As experts in risk transfer, it seems like a player's premium would be less expensive than the lost salary from not reaching free agency.

Remember too: any risk of injury/underperformance assumed by the team should be balanced against the potential for creating surplus value from an "underpaid" player. 

Ideally, the first 2-3 years of any second+ contract builds that in to the calculus through scaling up cap hits. 

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3 minutes ago, DoYouSeeWhatHappensLarry said:

Remember too: any risk of injury/underperformance assumed by the team should be balanced against the potential for creating surplus value from an "underpaid" player. 

Ideally, the first 2-3 years of any second+ contract builds that in to the calculus through scaling up cap hits. 

Thats why a team has to draft well.

Falcons' got this.

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Some players just love the team they are on. They love the system they play in, and excel. Where-as on other teams the player may not Fit into their system, and be forced into a discomfort zone. This is especially true of Defensive players. Some players function better in Zone-based defenses (Richard Sherman, Rico, and others) while others are better in more Man-Press defenses. Also certain players are better in 4-3 or 3-4 schemes.

I think Ricardo knows that Dan Quinn's defense helps him excel the most, and is more comfortable in it, and will garner the most money for the player that he is. Not to mention that the current market for free-agent Safeties is as low as its ever been. Also, he is on a Championship Caliber team with an opportunity every season to compete for a SB - unlike half the rest of the league.

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In addition, when you see that perhaps the Best Free Safety in the NFL right now is still essentially unemployed (until and unless Seattle caves in to pay him), then it would be wise to accept a fair deal from your home team now rather than test the market later.

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10 hours ago, Flying Falcon said:

Not getting what you're trying to say Moses. Could you lead me into your point? :huh:

I might not have one!  It had just occurred to me that there were some anti-free market forces involved in early-signing/avoiding free agency, and those forces could be understood through risk transfer and basic insurance (principals.  REALLY basic insurance principals.)

I was hoping it could generate some insightful further discussion, and it has.

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3 minutes ago, HolyMoses said:

I might not have one!  It had just occurred to me that there were some anti-free market forces involved in early-signing/avoiding free agency, and those forces could be understood through risk transfer and basic insurance (principals.  REALLY basic insurance principals.)

I was hoping it could generate some insightful further discussion, and it has.

As it stands in todays NFL, particularly with the new rule changes, it is in every Safety's best interest to get what you can out of your home team, and just take whatever they are willing to give you, and avoid free-agency if possible. This new helmet rule is pretty much eliminating the Safety position, which has always been a violent position. Its forcing Safeties now to basically play as 4th and 5th CBs on the field.

The days of Brian Dawkins and Ed Reed are gone.

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10 minutes ago, Tim Mazetti said:

Wait! No Scott Case?

What a Horrible fan I am LOL. Scott Case for sure! That guy... from Oklahoma, was perhaps one of the toughest safeties the NFL ever saw. Too bad he played on crap Falcon teams, nobody outside of Atlanta ever knew who he was.

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On 8/7/2018 at 4:05 PM, HolyMoses said:

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Players value security above all else. Signing a new contract means more guaranteed money. Anything can happen in the final year of a contract, they might play amazingly and earn a massive pay day, or they might get hurt and lose a ton of money. Signing early gives players guarantees and it reduces the chance of losing a player to free agency. If this is not the norm already I would not be surprised if it is soon. Teams are watching Atlanta secure all of their best players without even letting them sniff free agency.

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1 minute ago, The Falcon Jedi Knight said:

What a Horrible fan I am LOL. Scott Case for sure! That guy... from Oklahoma, was perhaps one of the toughest safeties the NFL ever saw. Too bad he played on crap Falcon teams, nobody outside of Atlanta ever knew who he was.

A missile. I watched him at field level at AFCS nearly decapitate Roger Craig.

There was a Fan Club that demonstrated outside the stadium.

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No S.  That indicates that I saw it. Brutal does not describe fully what I witnessed,........................................... an unbelievable collision. 25 ruled the play.

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17 hours ago, The Falcon Jedi Knight said:

As it stands in todays NFL, particularly with the new rule changes, it is in every Safety's best interest to get what you can out of your home team, and just take whatever they are willing to give you, and avoid free-agency if possible. This new helmet rule is pretty much eliminating the Safety position, which has always been a violent position. Its forcing Safeties now to basically play as 4th and 5th CBs on the field.

The days of Brian Dawkins and Ed Reed are gone.

lol no they arent. 

Pump the brakes, bro. 

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