Ian Desmond's Dilemma (a)

This is the first in a series of four cases.Ian Desmond, a baseball player for the Washington Nationals team, was deciding whether or not to accept a new contract. Should he take a seven-year contract, and stick it out with the team for for another seven years? He was young and talented, and his star was on the rise. With strong 2013 performance statistics, he was in a good position to negotiate. Or should he take his chances on the free-agent market entering the 2016 season, and command an even better contract? This case uses decision-tree analysis and could be used in an introductory "Decision Analysis" course, either with the probabilities mentioned in the case or with an assignment to calculate break-even probabilities. Excerpt UVA-OM-1574 Sept. 7, 2017 Ian Desmond's Dilemma (A) Preseason, Spring 2014 In 2009, at the age of 23, Ian Desmond started playing U.S. major-league baseball (MLB) with the Washington Nationals (Nats) baseball team. Desmond proved himself to be an extremely capable and sometimes spectacular shortstop, both when playing his defensive position out in the field and when at bat seeking great hits and home runs for his team. In 2012, he won his first Silver Slugger award, which was given to the best offensive player at each position within each team, and even made the National League All-Star Team. By preseason spring 2014, Desmond was 28 and had played full time under contract with the Nats for four years (from 2010 to 2013). Nats management had just offered him a seven-year, $ 107million contract extension with an average annual value (AAV) of $ 15.3million. He had to decide whether to accept this offer or turn it down in favor of a potential two-year contract that had not yet been negotiated. MLB rules permitted a player to entertain offers from other teams once he had completed six full seasons with his original team. The four years Desmond had already played under contract, combined with a yet-to-be-negotiated two-year contract would get him to the requisite six years and allow him to enter free-agent status in 2016. The proposed seven-year contract, however, would bind Desmond contractually to the Nats for most (if not all) of his remaining peak career years—at least until he was 34, at the end of the 2020 season. See Table 1 for details. . . .