Yeah great stuff. The reason players take less money is simple. It’s about loss aversion, not what is “normal” economic utility (a bogus concept, largely).
Imagine: you aren’t don’t have to work every again rich, but you aren’t broke. Someone proposes you have two options, must choose one:
A) 100% guarantee of 10 million dollars. Here it is. Enjoy
B) 80% likelihood of 20 million dollars. And a 20% likelihood of $1 million.
From a pure economic utility perspective, clearly Option B is much better. But many people wouldn’t go for it, because option A is a guarantee live changer. But the risk is horrifying, because imaging the regret of the 20% likelihood coming to fruition is very powerful. Many people pay a premium for certainty, leaving a lot of money on the table to get over the hump of even a small amount of risk. I think Michael Lewis’ new book will be about this stuff. Anyway, reading Kahneman’s Thinking and Fast and Slow is a great look at how the current system is so perfectly designed to control costs and keep players from reaching free agency. Good article.