Odom Equilibrium

Zephid —  July 14, 2009


In Game Theory, there is a canonical game known in the academic world as “Hawk-Dove.”  Colloquially, however, it is more commonly known as the game of chicken.  For those who have never experienced such an event (and those who have stupidly attempted to perform this game using automobiles), the game entails two players engaging in some activity until one person stops, in which case the other person wins.  One of the most common versions of chicken is to drive two cars at one another on a road, and the first person to veer off the road loses (yet, stupid, I know).  This game has been used to model numerous events, from possible nuclear conflict (dramatized in Dr. Strangelove), or in our case, contract negotiation.

We’ve had plenty of discussion regarding the arrival of Ron Artest, the departure of our dear Trevor Ariza, and articulated some thoughts about Shannon Brown’s new deal. Yet, the question of which we covet the most clarity, but remains the most enigmatic is, “What the heck is going on with Lamar Odom?” Many fans have grown frustrated with the prolonged process, often seeking the comfort in even the bleakest of certainties, growing more and more restless with each passing day. Many attempt to rationalize the thoughts of each side, analyzing Odom’s free-market value as compared to our championship probabilities. Yet, in the end, it all comes down to two players: Lamar Odom vs. the Lakers front office.  As both parties rumble headlong towards one another, it is a question of who will blink first and give in to the others demands: Will the front office acquiesce to Lamar’s $10 million dollar demand, or will Lamar come to accept his paycut and come back to his championship teammates?  For that, as always, we must find out who has the most to gain, and who has the most to lose.

While there is debating as to how much Lamar Odom’s presence impacts our success, there is no question that his presence improves our chances of winning the championship; A line-up with Lamar Odom is no doubt better than a line-up without Lamar Odom. Yet, with an eye to the future, remaining financially flexible is a huge issue, especially during this economic downturn in which the salary cap is anticipated to decrease by as much as 15%. Because of this, it is important to sign Odom to an economically sound value, both in a financial sense and a tradability sense.

It is here that we have a conflict of interest. As in the rest of rational free-market economics, it is Lamar Odom’s right to seek the maximum possible value from his employer, and it is the employer’s right to receive the greatest utility from Odom, this being the value Odom adds on the court less the value of his contract. In this manner, the front office is trying to gain Odom’s services at the least possible cost, and Lamar is trying to hold out as long as possible until the Lakers will not offer any more money. The question that many of us have is how high the Lakers should go. Back in December, I (in retrospect, rather foolishly) made the conjecture that at least some team would offer Odom a max contract. This is obviously not the case anymore, and the most any team outside of Portland and Oklahoma City has at most the Mid-Level Exception to offer. Many have claimed that this gives Odom little leverage, and thus the Lakers straying too far above the mid-level would be a complete blunder.

However, we need to consider exactly how much leverage the Lakers have. Having already used the Mid-Level Exception on Ron Artest, the Bi-Annual Exception on Shannon Brown, the Lakers are left with sign-and-trading Odom and minimum salary players as options outside of re-signing Odom. Given that the Lakers are already deep in the luxury tax, they won’t sign-and-trade Odom unless they receive an absolutely absurd offer (think a high-profile young player, a #1 pick, and an expiring contract) or non/partially guaranteed contract). And as for minimum salary players, well, they won’t come anywhere close to fulfilling the roles that Odom plays on our team.

Odom and his camp know this fact full and well and are exploiting it to no end. Even with reports of Odom refusing an offer upwards of $8mil per year, Odom still knows that the Lakers need him more than he needs the Lakers, or at least that is the front office’s perception. This led to them repeatedly upping their offers, with some rumblings that Lamar will stubbornly hold out for his $10 mil per year till the bitter end.

I recently bought an apartment and the one thing my real estate agent told me is to not make incrementally increasing bids. If you initially bid $220,000 and they refuse, don’t continually up your offer by $5000. If you bid $225,000, then $230,000, then $230,000, the seller will realize that you are willing to pay more and just keep refusing to squeeze as much money out of you as possible. The correct play is to make an initial bid, and if that bid is refused, make a final offer and be prepared to walk away. This forces the seller to make a decision and either accept your offer or face the uncertainty of having to accept something less at a later date.

The Lakers have already made this mistake, and Lamar has caught onto it. His holdout may end today, or tomorrow, but it may last until next week, next month. Lamar senses weakness in the Laker camp, and his plan to hold out from the beginning has worked. With respect to the free-market, Odom was expected to command at most a little bit above the MLE, a slight premium for giving the Lakers certainty that he’ll sign with them. Yet, he has gained much, much more than that, and is even holding out for more. Even the staunchest of Lamar Odom supporters feel that $9 mil per year is too much, especially given how deep we are in the luxury tax, but the fact that the negotiations have gotten to this point is indicative to the success of Lamar Odom’s strategy.

Personally, I believe that Lamar brings enough assets to our team to justify the tax bill.  Yes, I agree that $9 mil per year is too much, and we should be careful to make sure the deal isn’t too long term, as Odom’s production is highly correlated with his natural ability and athleticism, which are bound to deteriorate with age.  But, now that it has come to this, the Lakers have to bite the bullet and take the luxury tax hit.  If winning a championship is the ultimate goal, and nothing comes close to it, there’s no question that the right move is to re-sign Odom, regardless of the price.  Re-signing Odom gives us the best chance to win a championship, and when it comes to choosing between dollars or glory, I choose the glory.  Then again, it’s not my money either.

Whatever the case may be, we as fans can only wait.  We may gripe with the front office’s unwillingness to pay Lamar his due, or Lamar’s unwillingness to give a discount to the team that never lost faith in him, but in the end, it all comes down to who’s willing to stay the course longest in this proverbial game of chicken.