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LeBron James’ Game (Theory)

LeBron-decision

At the Monkey Cage, Joshua Tucker applies game theory to argue that LeBron James ought choose which team he signs with quickly.

First, let’s make some simplifying assumptions, as all game theoretic models do.  I’m going to assume that basketball players’ decisions regarding the team with which they should sign are motivated by two factors: making money and winning championships. It may be that other factors – such as playing close to home – matter as well, but my approach here is going to focus on money and winning.

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Where things get interesting is when the chances of winning a championship go up if a player is paid less money.  This could be because by taking less money in a salary-capped NBA the player in question gives his team more money to sign other strong players (e.g., what Phil Jackson wanted Carmelo Anthony to do with the Knicks), or it might be because the best teams don’t have as much money available (e.g., the current champion San Antonio Spurs), or it might be because in the NBA teams are allowed to sign their own players for more money than players from other teams.  Either way, players are often faced with a choice between earning more money and being more likely to win.

This leads to a complicated situation when multiple free-agents are trying to decide where to sign.  If I’m a free agent, not only do I have to think through what my signing will mean to a team’s ability to sign other players and compete, but I have to anticipate what other players are thinking as well.  I have some information – I know how much money every team has to spend – but I don’t know how much everyone else values winning vs. money.  Solving this game is complicated, and would normally place a premium on waiting to see what everyone else does first, although even that’s not as simple as it seems because every time another free agent signs, that leaves less money available to sign the next free agent.

Tucker assumes, correctly I believe, that James is easily the best free agent available, if not the best player in the game.

So let’s think this through: if Lebron waits until every other play has signed, those players will all have made their decisions not thinking they have the maximum chance of winning a championship.  Because they value both winning and making money, every one of those players will have signed for more money than they would have needed to sign had Lebron already signed with that team.  Lebron, upon joining that team, will therefore be playing with players who were more expensive than they needed to be.  This in turn means that whatever team he joins will either (a) have less money to sign Lebron or (b) have less money to sign other players besides Lebron and the free-agents they have already signed.  Either way, Lebron gets less of what he wants (defined here as money + likelihood of winning) than if the other free agents had known he was going to be on that team before he signed.

Therefore the converse should also hold: by moving sooner, Lebron should be able to get more of what he wants.  By virtue of being the single best free agent available, Lebron instantly adds more to a team’s chance of winning a championship than any other player, and therefore will drive down the cost of acquiring other players to complement him as he seeks out additional championships.

Presuming Tucker’s assumptions are correct, this analysis is correct. Perhaps even common sense.

But I believe one of his key assumptions is wrong:

I have to anticipate what other players are thinking as well.  I have some information – I know how much money every team has to spend – but I don’t know how much everyone else values winning vs. money.

It’s true that Tucker and I are in that boat. We have only conjecture and rumor to go on. But that’s surely not true of LeBron James. As he demonstrated four years ago, he has the ability to talk to the key players. If he really wants to continue playing with Dwayne Wade and Chris Bosh, he can not only let them know that but suss out how much below their market value they’re willing to sign for in order to get the massive win probability advantage that comes with being on his team. Likewise, if he wants to play with Carmelo Anthony, he can talk with him about the various options—whether Anthony should sign with the Heat or whether the two would sign somewhere else.

With rumors that Bosh is thinking very hard about playing for the Houston Rockets, there has been speculation that James would like that, as it would give the Heat the ability to replace him with Anthony. But it seems to me to make far more sense for James to convince Pat Riley to let Wade, who because of injury is a shell of the player he used to be, walk and instead keep Bosh and add Anthony.  Regardless, so long as Bosh would prefer to play with James for less money, there’s no big hurry on James’ part so long as he and Bosh are talking.

Additionally, even if we discount the “home town” angle of the “return to Cleveland” option—which I frankly dismissed as a media creation until a few days ago—there’s really no rush if that’s either James’ first choice or happy fallback option. The team has a lot of young, cheap by NBA standards, talent locked in for quite some time and, as we saw four years and five years ago, is an incredibly unattractive free agent destination even with James on board. So there’s really no hurry if he’s seriously considering that option.

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About James Joyner
James Joyner is the publisher of Outside the Beltway, an associate professor of security studies at the Marine Corps Command and Staff College, and a nonresident senior fellow at the Atlantic Council. He's a former Army officer and Desert Storm vet. He has a PhD in political science from The University of Alabama. Views expressed here are his own. Follow James on Twitter.

Comments

  1. C. Clavin says:

    Yeah…LeBron James is rich and gonna be richer…

    Like or Dislike: Thumb up 1 Thumb down 0

  2. al-Ameda says:

    As you would expect, this is completely about ego.

    For the next 5 to 10 years He will probably earn 4 to 8 times more annually in endorsement and advertising sponsorship revenue than he will with his NBA player salary. He can max out at about $30M per year or take a “discount” and get around $20M-25M a year (give or take).

    As long as he doesn’t do another “The Decision” televised spectacle with Jim Gray or some other ESPN bloviator, I’m down with it.

    Like or Dislike: Thumb up 1 Thumb down 0

  3. James Joyner says:

    @C. Clavin @al-Ameda: James actually hasn’t had a max contract—or even been the highest paid player on his own team—his entire career. This despite obviously being the best player on his team since the day he signed with the Cavs out of high school and being the best player in the NBA most of his career.

    I agree that he can afford to play for less than a max deal—hell, for $1M a year, which is chump change by NBA standards—given his endorsements. But I can understand his finally wanting to get paid what he’s due.

    Like or Dislike: Thumb up 2 Thumb down 0

  4. C. Clavin says:

    @James Joyner:
    Don’t get me wrong…I have no problem with payers getting paid.
    And LeBron’s actions and behavior have changed my mind about him since he first came to the league.
    But rich at some point becomes simply a matter of degree.
    Are you a Vanderbilt or a Carnegie or a Rockefeller?
    Does it matter, really?

    Like or Dislike: Thumb up 0 Thumb down 0

  5. James Joyner says:

    @C. Clavin: Oh, absolutely. Bob Costas pointed out years ago that the difference between $25,000 and $50,000 is much greater than the difference between $1 and $2 million. Lifestylewise, the delta between $15 and $22 million is unnoticeable. But ego matters, right? It has to gall LeBron that relatively mediocre players are making much more than he is. Your paycheck is, among other things, a measure of how much you’re valued and respected.

    Like or Dislike: Thumb up 0 Thumb down 0

  6. Davebo says:

    @James Joyner:

    I don’t think it bothers him all that much. After all, he could have gotten a 7 year max money contract instead of the one he signed in Miami.

    Like or Dislike: Thumb up 1 Thumb down 0

  7. MBunge says:

    Replacing Bosh with Melo would be a massive disaster. It would require either LeBron or Melo to play almost exclusively at power forward, something neither has ever done, and it would require them to play someone at center who is significantly worse than Bosh.

    Mike

    Like or Dislike: Thumb up 1 Thumb down 0

  8. al-Ameda says:

    @James Joyner:

    Your paycheck is, among other things, a measure of how much you’re valued and respected.

    Right now, Lebron James is “valued and respected” by the advertising community to the tune of over $40M a year, and that number is increasing because of his championship run. The NBA salary cap often creates a certain amount of dissonance between actual value and remuneration.

    Like or Dislike: Thumb up 3 Thumb down 0

  9. dazedandconfused says:

    His now-pregnant wife is from Akron. They are both from Akron, actually.

    http://larrybrownsports.com/basketball/lebron-james-wife-reportedly-wants-him-to-sign-with-cavs/235060

    A key for LBJ may be whether or not he can convince his selection of the current set of fee agents (talking Melo, mostly) to move to Cleveland and take less money in exchange for a ring or two. A difficult sell for many. That would be my Plan A. Plan B would be to convince them to take less money in exchange for having him and a shot at some rings in perhaps NY or LA, but Chicago would be my first choice if I were him from a purely BB perspective. They pass the ball there. They play defense. They take care of each other.

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  10. EddieInCA says:

    LeBron will end up somewhere in the Eastern Conference.

    No way he want to join any team in the West that has to go through, San Antonio, Portland, OKC, Dallas, Clippers, Golden State, Houston.

    In the East, any team he joins becomes the favorite to make the finals: Heat, Cleveland, Knicks, Bulls.

    Much easier to chase rings in the Eastern Conference.

    Like or Dislike: Thumb up 0 Thumb down 0

  11. DrDaveT says:

    @James Joyner:

    James actually hasn’t had a max contract—or even been the highest paid player on his own team—his entire career.

    C Clavin is right here — if you aren’t counting the endorsement revenue, you’re missing the point. Salary isn’t even the majority of James’s revenue. You’re not comparing $20M vs. $30M; you’re comparing $60M vs. $70M, which is even less distinguishable. The money is all the same to him at this point; it’s about winning.

    Like or Dislike: Thumb up 0 Thumb down 0

  12. James Joyner says:

    @DrDaveT: That certainly seemed to be the case four years ago. But he’s reportedly insisting on a max contract now. I don’t think we can discount the ego factor for someone in his position. I’m sure it irks him that he’s “only” got four league MVP trophies. It should.

    Like or Dislike: Thumb up 0 Thumb down 0

  13. EddieInCA says:

    I’m sure it irks him that he’s “only” got four league MVP trophies. It should.

    Cry me a river!

    How many MVP’s did Wilt get? 4 (He should have gotten 11. He re-wrote the record books)

    How many MVP’s did Shaq get? 1 (He should have gotten at least 6. He was the most dominant player in the game for a full decade. He lost to people like Steve Nash (twice), Tim Duncan (a great player, but MVP over Shaq in his prime? Not in any lifetime.)

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  14. dazedandconfused says:

    The Cavs just traded Jack and some Rooskie project player to “open up cap space”.

    Looks like the Cavs. I think the time factor for LBJ’s decision just sprung back. He will want to have his pick of the free agents with them.

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