Tuesday, September 16, 2014

Is RG III a sunk cost?

No, but the draft picks the Redskins paid for him are.  The  NY Times has more:

The moment the owner Daniel Snyder signed off on trading those draft picks to the St. Louis Rams to get Griffin, those picks were gone forever. Poof! Never coming back. 
From that point, the strictly logical approach would have been for coaches and management to treat Griffin like any other rookie who had great potential but a lot of work to do to live up to it. That doesn’t mean that they should have plopped him on the bench every time he made an errant throw. Of course he needed (and, apparently, still needs) to learn the pro-level game, and it’s worth sacrificing wins today if you are getting a more skilled player for the longer run. No one argues that the 1998 Indianapolis Colts should have parked Peyton Manning on the bench amid his 3-13 rookie season. 
But there are plenty of indications that rather than treat Griffin like another promising but unfinished player, both fans and, at times, the team’s coaches seem to view him through the prism of what was paid to get him.


  1. RG III is a sunk cost. Whether he becomes a NFL superstar or doesn't earn a spot on the final roster the money that Daniel Snyder paid for him is gone forever. Keeping or releasing RG III should be based on how he performs on the field and how many games he wins. The team should not keep him if he doesn't develop into a solid quarterback regardless of the amount of money they spent on him. The amount of money the team paid for him is a sunk cost. It should have no bearing on if the team decides to keep him or not! It should be strictly based on performance.
    "The sunk-cost fallacy means that you consider costs and benefits that do not vary with the consequences of your decision. In other words, you make decisions using irrelevant costs and benefits (Managerial Economics, Froeb, McCann, Ward, and Shor, 2014)."
    In summary, the decision to keep or release RG III should be based strictly on his on-field performance. Not how much money the team paid for him when he signed his contract.

    Brian Carney, Managerial Economics, Dr. Singh, Empire State College

  2. This comment has been removed by the author.

  3. Well, I wrote a comment, but then it did not post, so I did a test, and deleted the test. Here's what I actually WANTED to post:

    I think the sunk cost question is a bit more complicated that just a yes or no, in this case. Clearly, based on his performance and injuries, he hasn't lived up to Washington's expectations. I do agree that it would likely be a poor decision to just dump him in relation to performance in his first couple of years (also considering his IR time). However, the team does have viable options. They could continue to invest in his development, incurring additional financial cost. They could trade him, but that would be a potentially difficult trade, since his contract is so pricey. They could go with another quarterback altogether. I think the primary issue with sunk financial cost is in the trade choice. In the NFL, player trade cost take into consideration the $ left on the player's contract. It becomes a cost that can be passed to the team that accepts the trade offer, therefore potentially changing sunk cost to an opportunity cost, as the $ would factor into the trade negotiations.

    I do think, however, that a major factor in Washington's decision as to what to do with RGIII should be the games won, as Brian said. In the NFL, winning games is highly valued, in my opinion, it could practically be considered a currency of its own. To not consider potential games won would be a hidden cost fallacy.

    Carly Hansen, Managerial Economics, Dr. Singh, Empire State College

  4. I’m going to change players in this game as I watch Dallas vs. New Orleans!
    I can truly understand how the Redskins feel about RG3. Should he stay or should he go? Well, I ask that question of Tony Romo. Many may beg to differ but we are here to agree to disagree.
    The Cowboys restructured Romo’s seven-year contract at $119.5 m. Does this make sense for a man who is 34 years old and has had multiple back surgeries? I called this a sunk-cost fallacy – consider the costs and benefits that do not vary with the consequences of your decision. (Managerial Economics, Froeb, Chap 3)
    Romo’s years in the NFL are dwindling and RG3 is just beginning, when he is not injured and he’s young. Romo is a NFL veteran and Griffin is a newbie waiting to be groomed. Romo is the future of the Cowboys and RG3 is the future of the NFL. RG3 got the leadership abilities and the physical makeup. His future is brighter that Romo’s.
    Don’t get me wrong; I’m a diehard Dallas Cowboy fan dating back to Roger Staubach. So, with this being said, I have nothing against Tony Romo, but he has just one more playoff win than Robert Griffin III.

    Suzette Monteverde, Empire State, Dr. Singh, ECO-65155X

  5. I agree with Brian's point, as the money has already been spent on the player anyway, so the team should seek to avoid making a decision solely based on it but rather on his performance. It's probably sheer human nature to apply the same logic the team presents in this situation, as we humans seem to be constantly calculating the weight between rewards and cost, and most people and organizations often do consider past investment decisions when choosing how to move forward, therefore this aversion to wasting money leads individuals to continue investing in a particular activity in hopes of utilizing, rather than wasting, their prior investments. Big mistake we do.

    Eduardo T., Managerial Economics, Dr. Singh, ESC

  6. I am not a football fan but this was a great article illustrating sunk-cost fallacy. Two sections that really drove the concept of this fallacy were in the beginning when Neil Irwin commented that we have a tendency to let our decisions be colored by things over which we have no control. Secondly, that they should have treated him as an unfinished player and not view him through the prism of what was paid to get him. (Irwin, 2014)What is it that they say about hindsight? Instead of figuring out what was best for the team as a whole, they were trying to get “what they paid for.” Brian, I do agree with your point as that is what the concept of a sunk cost illustrates; judge him on how many games he wins and not what you paid for him. As Richard points out, they could continue to invest in his development, incurring additional financial cost. But it seems that they could continue the cycle of never being satisfied with his performance vs the cost of drafting and training him. When making decisions, you should consider all costs and benefits that vary with the consequence of a decision and only costs and benefits that vary with the consequence of the decision. (Froeb, McCann, Shor, & Ward, 2014) This was for sure a learning lesson for this team and others. Seeing as though this post was from months ago, I would be interested if this happened to any other team, and how Washington will act in further draft selections.

    Works Cited

    Froeb, L. M., McCann, B. T., Shor, M., & Ward, M. R. (2014). Managerial Economics; A problem solving approach (3rd edition). Mason, OH: South-Western Cengage Learning .

    Irwin, N. (2014, 09 15). Robert Griffin III and the Sunk Cost Fallacy. The New York Times.

  7. For me this is the perfect example of a sunk fallacy as I am an avid football watcher. If you were looking at this situation as fan or someone within the industry you would want to invest in your player in hopes of making him better. Sunk cost fallacy is basically when the amount you invest in a project or person, that will not return the amount invested, therefore not worth anymore time. If you are strictly looking at it from an economists point of view, it is a sunk fallacy. The Redskins traded their picks, never able to obtain them back. If RG does not perform as they expected him to, it is suck cost and allowing them to look for another option to help the team succeed.
    The Redskins have to remember that they cannot look at RG as the price they paid for him, but as an “unfinished” just as any other player that would walk onto the field. He does not deserve an special treatment or to be put on a pedestal because he was acquired through the trade of draft picks.

    Froeb, L. M., McCann, B. T., Shor, M., & Ward, M. R. (2014). Managerial Economics; A problem solving approach (3rd edition). Mason, OH: South-Western Cengage Learning .

  8. The sunk-cost fallacy means that you consider costs and benefits that do not vary with the consequences of your decision. In other words, you make decisions using irrelevant costs and benefits. (Froeb, McCann, Ward & Shor 2014). So the moment the owner Daniel Snyder signed off on trading those draft picks to the St. Louis Rams to get Griffin, and those picks were gone forever, that was a sunken costs associated with RG III. My belief in the NFL, is that highly rated quarterbacks are hard to come by in the league. High draft picks come at extraordinary price to the organizations if they don’t have a losing season (or potentially traded away) and without a good quarterback, a franchise can be decimated for years. A poor performing team can destroy revenue, due to a lack of attendance and sponsorship to the team. Even the though the draft picks that were traded away in order to get RG III were sunken cost, I can see the difficulty in organizations, teams and fans finding it difficult to just look away from these cost in the treatment of what they believe is a huge investment for the team. Keep in mind, the general manager, scouts, and head coach basically have their jobs on the line if this player doesn’t work out and are often willing to do whatever it takes to make sure their decisions work out. They are less incline to just walk away from the choices they have made or insight they have provided in order to bring him to the team, because they can ultimately lose their jobs.

    Luke, F., McCann, B, Shor, M., & Ward, M. (2014). The One Lesson of Business. In Managerial Economics (3rd ed., p. 26). Mason: South-Western Cengage Learning

  9. The NY Times article was written in September, near the start of the 2014 NFL season; with the remaining portion of the season now complete the illustration of the sunk cost fallacy is not even more clear. As the text suggests, decisions should be based on relevant costs which are all costs and benefits that vary with the consequence of the decision and only costs and benefits that vary with a decision. Irwin points out, we shouldn’t focus specifically on the cost of RG3 because the Redskin’s organization will never get them back. The Redskins gave up (3) first round draft picks and signed Griffin to a contract of $21.1 million base salary plus $13.8 million signing bonus. The reality of situation, regardless of Griffin’s pay, is that he is considered overhead to organization because Griffins costs are fixed in relation to output. Fast forward to the end of the season, a season that was riddled by injuries and poor play, a decision has to be made by team officials, do they keep him on the roster, trade him or release him? His contract has 2 years remaining on his rookie deal, given the knowledge that the costs are sunk and them money is gone for both his services and the sacrificed draft picks, common sense says they should try to ride out the play with hopes that he can improve and begin to add value. If Griffin’s play improved enough, he could potentially create value in that he could desired by other teams. The Redskins should be careful not to focus on their own costs (the base salary and draft picks) if doing so they could be committing the hidden cost fallacy and ignoring all relevant costs. Time will tell; Griffins play needs to significantly improve over the remaining two years of his contract.

  10. As we are aware, Opportunity Costs are defined as the cost of the alternative given up in pursuit of another (Froeb, McCann, Shor, Ward, 2014, p. 25). In the relation to this particular blog, what was the opportunity cost for the Washington Redskins to acquire Robert Griffin III (RGIII) in the 2012 draft? From my perspective, three first round draft picks and a second round pick to the St. Louis Rams. I surmised that the Washington Redskins theorized rookie Robert Griffin III was a franchise quarterback that could make them instant contenders for the Super Bowl. As for the St. Louis Rams, they already had a franchise quarterback in Sam Bradford. Moreover, the St. Louis Rams could get more bangs for their buck by trading the number two pick and having a variety of players to work with (Stueve 2013).

    In the NFL, many players are drafted and they did do not always become dominate players. Each year, 256 players are in the draft. From here, 32 teams start with rosters of 90 players and they need to be down to rosters of 53 players by the season opener (Davis, 2014). This indicates that many players will be cut and draft picks can be a bust.

    Therefore, NFL teams will try to use top picks to ensure the greatest likelihood of success. In trading draft picks, a team is willing to pay for the opportunity to move up in the draft and acquire a perceivable better candidate for a particular position. The return for getting the correct selection is a superior player and the ability to generate a winning team, playoff games, and greater revenue for the franchise (Gnatt 2014). Rex Grossman in a December 3, 2014 post still believes that RGIII can return to being a great quarterback and prove Washington Redskins made a good trade; only time will tell (Gnatt 2014).

    Karen Whelpley

    Work Cited
    Froeb, L., McCann, B., Shor, M. and Ward M. (2014). Managerial Economics: A Problem Solving Approach. (Third Edition). Mason: South-Western Cengage Learning.

    Gnatt, D. (December 3, 2014). Rex Grossman thinks RG3 can be a Great Quarterback Again, If…Web. (February 14, 2014). Retrieved from: https://www.profootballtalk.nbcsports.com.../rex

    Stueve, W. (May 9, 2013). Re-Visiting the Redskins' Trade for RG3, Did St. Louis Get Better Deal? Web. (February 17, 2015). Retrieved from: http://bleacherreport.com/articles/1633957-re-visiting-the-washington-redskins-trade-for-rg3-did-st-louis-get-better-deal

    Davis, II., W. (August 28, 2014). A Numbers Game: Making an NFL Roster. Web. (February 17, 2015). Retrieved from: http://www.huffingtonpost.com/wade-davis-jr/a-numbers-game-making-an-nfl-roster_b_5731630.html