Scott Kingery and the Problem of the Prisoner’s Dilemma

Scott Kingery just signed a long-term deal with the Phillies for life-changing money. Congratulations, Scott! Of course, Kingery has yet to play in the big leagues, and that makes this deal unusual. The previous largest extension ever for a player who hadn’t yet debuted in the big leagues was Jon Singleton’s deal. That didn’t work out too well for the Astros, but Kingery is a great prospect. Odds are, Kingery will be fine, and this deal will be fine. That’s hard-hitting analysis for you.

There are two things in baseball that really pique my interest: rules and things that have never happened before. The Kingery extension is an example of the latter. This is something new, and that makes it interesting. What makes it doubly interesting is how my Twitter feed populated immediately after news of this deal had percolated through the interwebs for a time. People seemed to have one of two reactions:

1. Kingery signed a below-market deal just to avoid starting in the minors and having his service time manipulated, and therefore this contract is a joke.
2. The Phillies paid too much money to a guy who hasn’t shown anything (literally) at the big-league level yet, and therefore this contract is a joke.

The People seem to agree that the contract is a joke, but can’t quite agree on why. And both points can’t be true: if the contract is a joke because it’s a gross overpay, then it can’t also be a joke because it pays too little. And this got me thinking about the prisoner’s dilemma.

The prisoner’s dilemma is one of the first things you learn about in game theory, and most law schools teach game theory in some form or other.

The prisoner’s dilemma is a paradox in decision analysis in which two individuals acting in their own self-interest pursue a course of action that does not result in the ideal outcome. The typical prisoner’s dilemma is set up in such a way that both parties choose to protect themselves at the expense of the other participant. As a result of following a purely logical thought process, both participants find themselves in a worse state than if they had cooperated with each other in the decision-making process.

The typical example of the dilemma is something like this: two prisoners are brought into two separate rooms. If neither confesses to having committed the crime, each serves a year in prison. If only one confesses, then the confessor goes free while the non-confessor serves 10 years in prison. But if both confess, then both will serve five years in prison. Game theory predicts that because people are solely self-interested beings, both will confess, because that way each can ensure avoiding the worst possible outcome (10 years in prison). But real-life testing has shown that people cooperate far more than the prisoner’s dilemma predicts, resulting in neither side confessing.

Why do we care? Because the prisoner’s dilemma is supposed to be the basis for all contract negotiations. Rarely will those negotiations produce a deal that meets all the demands of one side, or even most of the demands. Instead, both parties tend to avoid what they believe to be the worst possible outcome for themselves.

Kingery’s deal is, I think, different. Kingery’s deal shows cooperation between player and team.

Let me explain why, using our game again. The Phillies, on one side, are now trying to contend, having brought aboard Jake Arrieta and Carlos Santana. Kingery is one of their 25 best players, and might be a multi-win upgrade over Maikel Franco. The Phillies have two options: they can pay Kingery more money for fewer years of control by calling him up now, or they can keep Kingery for longer, but lose the wins he adds to the big-league team. Meanwhile, Kingery can maximize his long-term earnings while also increasing his short-term risk, or he can accept less money now for more security and less risk. If both sides acted as we would expect them to according to the prisoner’s dilemma, the Phillies would be holding down Kingery to manipulate his service time. But, here, the Phillies gave Kingery an unprecedented $24 million guarantee. Why?

There’s no clear answer, but I’ll hazard a guess: the Phillies fancy themselves contenders, and not unreasonably so. So, as a result, Kingery had more leverage than a player ordinarily does, and the Phillies had more downside than a team usually does. For a team like the Royals or White Sox, going nowhere in 2018, it makes little sense to offer Kingery this deal. But for a team like the Phillies, who are on the playoff bubble and for whom every win matters, paying Kingery makes a lot of sense. If Kingery is what the Phillies think he will be, they’d have to pay him eventually, anyway.

And for Kingery, while it’s easy to say he gave away the store, I think that’s not clear cut either. If he had said no, he could have broken his ankle tomorrow and never been the same. That is, in effect, what happened to Jon Singleton. Plus, take a look at the seven-year, $66 million deal Eugenio Suarez just signed. Kingery has a $24 million guarantee, plus three option years worth a total of $42 million with a $1 million buyout, for a total of… $65 million. Kingery basically just signed something pretty close to the Suarez deal, which we thought looked good given the recent market. Yes, Kingery’s deal could be two years longer for the same money, but Kingery has also never played a big-league game.

So while it’s easy to look at this deal and pan it both from a pro-owner and pro-labor perspective, the truth is that the agreement seems — to me, at least — to be the precise sort of deal at which two parties arrive when incentives are balanced. Think of it as the scenario in the prisoner’s dilemma where neither side confesses. They say that a true compromise should have everyone walking away unhappy. The Phillies are unhappy that they just agreed to give Suarez money to somebody who’s never taken a big-league at-bat. Kingery is unhappy because, in all likelihood, he won’t get a shot at $100 million in six years. But objectively, the Phillies and Kingery both walk away with what they needed — for the Phillies, their best chance to win now and, for Kingery, life-changing money. Deals don’t get any better than that.