So one of the greatest ex-Sox pitchers ever surpasses another in the money stakes: Roger Clemens agrees to pitch for the Astros for $18m, surpassing Pedro Martinez’s record $17.5m salary for a pitcher.
I visited the Sports Economist, which made me think about the contract. If Clemens’ ultimate goal was to get a contract worth $18m (as opposed to serious hemming and hawing over whether to keep on pitching), a strategy of submitting a ridiculous figure like $22m makes sense. Clemens could’ve submitted the $18m proposal to an arbitrator and taken the risk that he would get either $18m or $13.5m. Instead, Clemens submits $22m, a figure that can be read either as a reflection of Clemens’ self-valuation (7 time Cy Young winner, only made $5m last season) and a ludicrous figure based on irrational logic. The fact that the $22m figure is still within the realms of a plausible award for the arbitrators acts as a a credible threat to the Astros, who don’t want to risk going that high.
Contrast this to an $18m proposal by Clemens. An $18m proposal might have caused the Astros to say “wait and see” since they clearly would be happy with either offer (as indicated by the fact that they agreed to this final contract). From Clemens’ point of view, he faces the risk that he might end up with $13.5m. By contrast, a $22m offer means the two sides definitely negotiate, and Clemens almost certainly gets the $18m he wants.
The point is this: it makes economic sense for Clemens to act irrationally to a certain degree and submit a figure that was within the realm of the possible but based on non-economic logic (e.g. the symbolism of a uniform number). That figure would serve merely as a signal that he wanted a huge chunk of change to keep on playing. Weirdly enough, a high bid transfers all the risk to the Astros; a low bid means Clemens takes on the risk that he might not pitch even when he wants to.