Sports and Opportunity Costs

Costs are around us everyday whether we realize it or not. Chapter 7 in the book proposes several different kinds of costs. Probably the most common cost we face everyday are opportunity costs. These are trade-off costs, or the cost of the highest valued alternative that must be foregone when a decision is made. I face this situation everyday when I make the decision to take a day off work to study, or pick an elective class of economics over a management class.
Major league sports face this cost every season. When deciding how much they should pay a certain player they must look at the opportunity cost of doing so. An article I found was about the Toronto Blue Jays in 2002, not signing Jose Cruz, when he wanted 5 million a season to play for them. The Blue Jays let him go and in return drafted 6 new players for a little over 6 million dollars. The opportunity cost the Blue Jays faced was giving up one of their most popular players for about the same price as getting 6 new players.
Sports team face opportunity costs like this one, every year when they do their draft picks. They must decide if a player is worth the money they want or if their is an opportunity cost out there for the team. It is amazing to me how economics can play into major league sports without most people even realizing it.


Daniel said...

Major league sports certainly offers interesting economic senerios. Utah Jazz fans often wonder “what if” the Jazz hadn’t signed Andrei Kirilenko to a maxium deal contract. This agreement reduced the Jazz’s “cap space” precluding them from signing other worth while players. Kirilenko will earn more than $17,000,000.00 due to the teams decision to grant him maxium money. Most Jazz fans would conclude that the club’s opportunity costs by entering into this agreement were significant.

Dr. Tufte said...

-1 on Daniel for spelling errors.

Paige - you're taking this class from the wrong guy. Dave Berri - our newest economist at SUU - is one of the top sports economists in the world. You should take some of his classes.

You're right about opportunity costs though. In fact, they even apply at the level of how plays are called. Football is a good example of this: the opportunity cost of passing is the typical 2-3 yards or so that you can pretty much guarantee on most running plays.