Good short article from Wages of Wins on the economics of doping in sports. On the A-Rod situation:
You may find yourself arguing: isn’t it costly for a player to sit out the games? If A-Rod is denied the 2014 season, he will give up some income, right? True–he might. But, the decision to break the rules and take the banned substances is really made based on the player’s expected benefits weighed against the expectedcosts. Nobel Prize winning economist Gary Becker introduced this principle in his paper Crime and Punishment: An Economic Approach (1965). The expected costs are equal to the penalty (i.e., the game suspension or ban) multiplied by the probability of getting caught and the probability of being punished (having the penalty applied). So, even if the 2014 ban holds, A-Rod will still have three years on his contract at $61 million (plus incentives for various homerun milestones)! From his public comments one gathers A-Rod is not expecting the penalty to be applied in full. So, no matter how you slice it up, A-Rod’s behavior–though illegal–was rational economically speaking. And, that is why tomorrow’s PED headline will be old news.