Two other things. Say LaRoche signs in Houston.. they wouldn't lose their number one overall pick, correct? Confusing.
This year the top 9 picks are protected. Usually it would be the top 10, but last year somebody (Pirates I think) failed to sign their top-ten draft pick so they got compensation for that.
Lastly, let's say a player who's market value is under 13.3M/year is offered the extension but decides to test the market. Teams aren't going to want to give up a 1st rounder for a 1.5 WAR player. Could this result in an overload of average players in the market with teams unwilling to sign?
Well, that's why basically if you're a bad player you have incentive to accept. Like, say, if Nyjer Morgan had been offered $13.3M, nobody would have signed him in free agency because he's not worth a draft pick, and nobody would have EVER signed him for $13.3M. Basically that's where your agent says, "hey, you may be a fruitcake, but you're not getting a bigger offer than that." My only thought is, maybe somebody hates the city/team so much they would give up anything and everything to get out of there.