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Monday, 28 September 2009

Subverting economists' assumptions - Geelong Cats as a case study

Off the back of their great win in the Grand Final on Saturday (which I haven't yet seen as I was up to my neck in help run the first TEAR regional conference in Canberra - great turn out, great day, but that's not the point) there is discussion of the impact of the AFL salary cap on the ability of the club to hold their amazingly good team together over the next couple of years.

And that is precisely what the salary cap is designed to do. embedded in it is the assumption that the players as their value to other clubs increases as they come off contract will go for the higher value contacts that will be on offer.

The discussion in the paper suggests that this theorem might not be totally effective. There are suggestions that over the past couple of years Geelong players have settled for contracts around 20% below the market rate simply so that as a group they can continues to play together and that there was a suggestion from one of the players that they would move to reach the same outcome again for those players with contracts up for renewal this year.

A couple of things arise from this: it suggests that the experience of continuing to play in a high performance team with a good chance of a premiership is something that players are willing to trade off against maximizing their income. It also suggests that there is a high degree of mutual trust to enable them to pull this off as not everyone comes off contract at the same time.

What happens to the salary cap process if people can subvert its operation by agreeing not maximize their income as individuals but are bonded to one another because, shock horror ! they are enjoying playing football together as a team, and a particularly exciting brand of football it must be said in one of the great teams of the past couple of decades?

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