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NHL Lockout Game Theory

At 12:01am on Sunday morning the NHL began it’s fourth player lockout in 20 years. This lockout as it was for the NFL and the NBA is about the division of money. But the biggest part of the lockout is what do the players do. Since the lockout was announced many players have began signing contracts over seas to go play in the many European leagues. There are several main reasons for this. The first that comes to most people’s minds is the paycheck. The next reason would be the to stay in shape for when the lockout finally ends. But the issue with going to play abroad is insurance. The contracts that the players are signing are only for the lockout period and they will terminate when the lockout is finished.

This scenario can be shown well in Game Theory. The players have three choices and the owners have 2. The players have the choice of coming to a compromise quickly, letting it drag out and try to get what they want, or they can go play in other leagues such as those in Europe and the lower levels in the U.S. The owners have two choices to come to an agreement or to keep the lockout going.

If both sides come to a settlement the payoff will be the greatest. Since the season will be on and the revenues that come in from every game will continue as they did last year. If one tries to settle but the other doesn’t, nothing will happen and they’ll keep losing money since no revenues will be coming in. If the players leave and there is no settlement then the players gain since they will be getting a paycheck but the owners will still be losing money since no games are being played. If players leave and there is a settlement the players will return from the other leagues for the most part and continue on in with the contracts they had before.

So from this it is in the best interest of both sides to come to an agreement in order to not lose a fan base and make sure that revenues keep coming in. Also there is a dominant strategy in the players to go play in other leagues. And in this simple version it would be that simple to choose it. But what you can’t see in this example is all the risk that the players would take.

If the players do decide to sign other contracts during the lockout, they are taking many risks. If they manage to get hurt during that time there contract could be terminated and they could be out of a huge deal. They also risk having to stay in the other leagues for longer than the lockout may last because some leagues require a full years contract to play.

So the question is what is the right decision. Should everything come to a settlement quick and possibly have this happen again? Do players go to other leagues and take the risks of not being able to play when the lockout ends? Or should each side hold out until they believe their terms have been met?

Sources:

http://www.nytimes.com/2012/09/17/sports/hockey/nhl-lockout-comes-as-some-players-go-to-skate-in-european-leagues.html?_r=1

http://espn.go.com/nhl/story/_/id/8403261/playing-europe-russia-easy-accomplish-locked-players

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