October 28, 2008
Rewarding Peavy
Jake Peavy is going to use his no-trade clause to capture the home town discount he gave San Diego if he is traded:
Translation: if you don't give us cut, we'll exercise the no-trade clause. Peavy can use his veto power to make sure that he captures a good portion of the economic rents generated by his contract.
This is very interesting to me. The Padres got a good deal out of Jake because he wanted to stay in San Diego. If they had signed him for more money, but without the no-trade clause, they likely would still have an under-market contract. They then could trade him and reap the rewards in prospects. With Jake and his agent standing up for themselves, the Padres may end up with Jake the continuing to pitch for a poor team.
This may change the Padres mind on offering no-trade clauses in the future. In general, salaries tend to rise faster than anyone expects. So a fair contract today may be under-market tomorrow. Paying a bit more for a no-trade clause is likely well worth it in that scenario.
Posted by David Pinto at
11:01 AM
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