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Sunday, January 02, 2005

Markets in Everything

Economists claim that side payments, when possible, will lead to a reallocation of scarce resources to those who value them the most. We preach these concepts in class and yet most of the time students fail to grasp the significance of the idea - my claim is they don't understand because they don't (overtly) see the practice on a daily basis.

Enter the case of Clinton Portis, traded to the Washington Redskins from the Denver Broncos during the previous off-season. While in Denver, Portis wore number 26 but this number belonged to Ifeanyi Ohalete who was already on the Redskins team. The two agreed on an exchange - number 26 for $40,000. Problem seems that Portis paid $20,000 and then Ohalete was cut from the team. Portis has failed to cough up the rest of the dough and Ohalete is "suing."

Portis and Ohalete made the deal following Portis' offseason trade from Denver to Washington. Portis wore No. 26 during his two seasons with the Broncos, but Ohalete already had the number from his three seasons with the team.

The two signed a contract June 4 stipulating that Portis would pay $40,000 for the number, according to Ohalete's attorney, John Steren. Steren said Portis paid $20,000 but did not make two subsequent payments of $10,000 due during the season.

If Portis and Ohalete had a verbal agreement I would suspect that reneging on the contract would be more feasible. However, a signed contract over a jersey number means that Portis really wanted the property rights to that jersey number. I have a feeling that Mr. Portis is gonna' have to pay up.

Markets are cool...
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