Not just that but the marginal utility of the extra dollars. Its not like the Yankees have budget issues. It just represents Labor extracting wages from Capital.
I've said this before, but it's worth reiterating that the contract price reflects the value of the player over the course of the entire contract and not just a given season. A-Rod may be vastly overpaid, but the total value of the contract has to be looked at in terms of his total production over the life of the deal, not just for any one season.* Usually, a player, even an elite player, may take a discount on the early contract salary for consistent payments throughout. Thus, he'll tend to under-perform his yearly salary in the later years. Similarly, a team may backload a deal to win when the player's productive at the start.
* Yes, yes, the circumstances of the A-Rod deal, etc. Not my point.
The cost to the yankees of a bad deal is very very low. They've got lots of room for error. A Rod would have pushed Tom Hicks into bankruptcy even faster.