A Sign of Rational Acting?

 This blog has suggested elsewhere that baseball contracting is irrational.  Players are offered jaw-dropping contracts based on their past performance which incentivizes them to have performed well in the past.  Sports contracts, we suggested, should have enough downside protection to lure players to a team, but the bulk of the salary should be in the form of incentives.  That’s how it works in the world of corporate executive pay, and clearly corporate executives are not paid when they don’t perform. Oh, wait.  Yeah.  Well, perhaps we more than a few tweaks away from the Peaceable Kingdom.  

In any case, today’s New York Times reports that the film industry is moving away from the mega-contracts that paid the likes of Leonardo DiCaprio and Russell Crowe $20 million up front for appearing in blockbuster movies.  Although nobody will talk on the record, it seems that the newly risk-averse studios are now paying a measly $2 million or so up front to land even huge stars like George Clooney.  But don’t worry, George Clooney and Sandra Bullock will not soon be sharing a roach-infested bed-sit in the East Village.  They make their profits, which still can be in the $20 million range, or even higher, once their films pass the break-even point.

So, even if actors cannot be counted on to behave rationally, there is evidence of some rational acting in Hollywood.

[Jeremy Telman]