Thread: JVR's ice time
View Single Post
Old
10-27-2011, 09:06 AM
  #48
Jester
Registered User
 
Jester's Avatar
 
Join Date: Jul 2004
Location: St. Andrews
Country: Scotland
Posts: 34,075
vCash: 500
Quote:
Originally Posted by sandlansd View Post
I disagree. We didn't pay him as if he turned the corner... if we paid in full for the playoff JVR, he would be making about $6M per season. Likewise, we didn't pay for regular season JVR... if we did, he'd be making somewhere around 3.5 million. We paid somewhere in the middle. And that's fine by me...

Because even if you're a total JVR hater, you have to assume he will develop at least a little bit more, putting the absolute floor for JVR's worth somewhere around 4M per season.

Homer was willing to take the gamble that JVR continues to develop in order to cut down on the salary he has to pay him. In finance, this concept would be called a "risk premium". You require a higher risk premium (in this case, a higher discount on the contract) when the future is more unknown. If we waited (as you seem to be advocating) and JVR continued to perform as he did in the playoffs, there would be less risk to signing him to a long term deal, and thus a lower risk premium, so you would end up signing him for about $6M per season instead of the bargain $4.2M you signed him for.

Homer is gambling on his ability to judge talent and JVR is hedging against a future injury or drop in his level of play... it works for both sides.

What the Flyers have essentially done is purchased a $100 investment that has a floor of $90 and a cap of $150 (I just pulled these numbers out of my arse). They have an investment w/ very limited downside and a pronounced upside. Who wouldn't take this investment?

Whereas if we waited, the price goes up (say to $120) and the downside shrinks (say to $115 so the most you can lose is $5), but the upside also shrinks (say to $140, so the most you can make is $20).
Flyers paid JVR the market rate fir a proven scorer last summer in free agency. Let's not act like it was a bargain price.

Jester is offline   Reply With Quote