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Stephen Weiss And The Economic Concept of Sunk Costs

Stephen Weiss was signed during the summer of 2013 to replace Valterri Filppula who had left for the Tampa Bay Lightning. Weiss was the former captain of the Florida Panthers, and is the franchises’ all-time leader in assists and points. He came in with a proven track record, and high expectations, and an injury which had limited him to 17 games during the lockout shortened season.

You know what happened next. Since joining the Wings, Weiss has scored two goals and four points, while appearing in only 27 games. He was recently sent down to Grand Rapids on a conditioning stint in order to receive some playing time and hopefully become a productive player again. That stint lasted two periods, and Weiss currently finds himself yet again on injured reserve.

There is increasing frustration among Wings fans, and many are calling for Weiss to be moved or bought out. But, for every one person that is in favor of moving him, many others are equally in favor of keeping him.

Arguments for and against keeping Weiss are generally very intricate and ambiguous. If we apply the concept of sunk costs to this situation, you may agree with me that the decision should in fact be fairly simple.

First, a little background on what sunk costs actually are.

From Princeton University:

In economics and business decision-making, sunk costs are retrospective (past) costs that have already been incurred and cannot be recovered.….In traditional microeconomic theory, only prospective (future) costs are relevant to an investment decision….Sunk costs should not affect the rational decision-maker’s best choice.

A microeconomics professor explained it to me like this: if you bought some food item, and it turns out to be disgusting, you should not continue eating it just because you spent money on it. The money has already been spent, you should now make the right decision to stop eating that food item because you abhor its taste.

Translating that back into hockey terms, we should get rid of Stephen Weiss if we feel that he is no longer valuable to us. Or, in more economics terms, if the opportunity cost of keeping Stephen Weiss is greater than the value which he brings to our team, he should go.

A certain portion of Weiss’s contract is at this point “sunk”; it is money which cannot be recuperated. This means that this money should not be considered when we determine what we should do with Weiss going forward. Our decision should be based purely on whether or not Weiss’s $4.9 million cap hit for the next three years is worth more than what we could use that money for instead. For instance, if the Wings feel that they can use those $4.9 million more effectively elsewhere, then it should be their #1 priority to move Weiss. Similarly, if the Wings feel that they could use the $3.8 million they would save by buying Weiss out, then they should do that.

Point being, the decision whether or not to keep Weiss should be determined by the opportunity cost of keeping him, rather than what we owe or have already paid him.

Another example of applying sunk costs to sports is first-round draft picks, who are often given a longer time to develop before being cut loose than other prospects who are underperforming. According to sunk costs, there should be no difference between a first and seventh round draft pick. If the player is not developing according to plan, cut your losses and move on.

A lot of people debate whether or not sunk costs can be applied in sports. Some believe that sports-based decisions are not as cut-and-dry as the decision of whether or not to produce another shipment of car parts. This is a legitimate concern when studying this topic. But, most, including my economics professor who I asked about the subject, will agree that at least to a certain extent, sunk costs can be used in evaluating whether or not to keep a player.

What does all of this mean for Stephen Weiss? Should we keep him? Should we move him? The answer is, at least from the perspective of sunk costs, that we should in fact move Weiss. Even if it means biting the penalty of a buyout, it is still worth it.

I believe that the opportunity cost of keeping Stephen Weiss is too great for us to hold on to him. Based off that statement alone, he should go. Regardless of whether we are able to move his entire contract, or only a portion of it, the money that we will pay him in the future can be used more effectively elsewhere.

What do you all think about this? Does this change your opinion about the Stephen Weiss situation?

Let’s Go Red Wings!

Should the Red Wings move Stephen Weiss?

Yes 698
No 242

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