Jon Garland’s Option, Sunk Costs, and the Divorce.

The Los Angeles Dodgers have declined their one-year $10 million option on Jon Garland. I estimate he’s worth around $7.5 million. Seems like the decision is a no-brainer, but it’s not.

The Dodgers have to pay $2.5 million to buy out the option; thus, they could have had him for $7.5 million, because the $2.5 million is a sunk cost (he gets that whether he plays for the Dodgers or not). Sure, the Dodgers may wish they hadn’t agreed to the option in the first place, but now that it is in place, all that matters is whether or not he’s worth the additional $7.5 million they would have to pay to retain his services. It appears that he is, without even taking into account Garland’s added value to a winning team.

Maybe the Dodgers have other plans for pitching, but I have to believe the McCourts’s divorce is playing a role here. This is an organization that has been willing to spend in the past, and now they’re clamming up over an awfully small amount of money.

5 Responses “Jon Garland’s Option, Sunk Costs, and the Divorce.”

  1. Lee says:

    FWIW, per MLBTR “The Diamondbacks will pay Garland his $2.5MM buyout, as per the terms of August’s trade for Tony Abreu.”

  2. JC says:

    Yeah, I just saw that too. Not sure if the $2.5 was coming regardless or just for the buyout. If it’s just for the buyout then the decision makes more sense.

  3. This ignores the possibility that the Dodgers could get the same production for less than $7.5mm. Given the salary structure in MLB, that seems very possible, especially with prospects like James McDonald and Josh Lindbloom in the organization.

  4. harry says:

    2.5mm is for the buyout. Wouldnt come otherwise.

  5. Rodney King says:

    Eh, if Garland is projected to be worth somewhere right around $7.5MM (maybe 8-10 is a decent range looking at Fangraphs?), then I don’t know if there is a lot of upside to signing him for right around his actual value- especially when, as noted, you can try out prospects in the same spot in the rotation, or sign other scrap heap pitchers for a couple million each and have a similar shot at 2 WAR production. Because Garland has basically 0 upside beyond his proven level of production, and when he falls off juuust a little bit…he will be terrible with that ~4 K/9 rate. Nowhere to go but down.