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August 15, 2016

Tools of Ignorance

Why Was Chapman So Expensive?

by Jeff Quinton

Esteemed colleague and possessor of a terrific first name, Jeff Long, recently wrote about why teams in contention might pay a lot for relievers, even though, as Long writes, “It’s a formula that the sabermetric community sometimes finds difficult to rationalize. Relievers pitch so few innings and are so volatile that their value is almost certainly lower than that of the prospects dealt for them.” As to why teams in contention do this anyway, Long concludes that when the playoffs come teams cannot simply accumulate WARP; they need to actually win individual games, and really good relievers help teams do so. That makes sense to me. It makes sense to me why teams add relievers to improve their chances of winning right now even if they are going to end up accumulating less WARP from a given trade. But what does still does not quite make sense to me is why Aroldis Chapman was so expensive compared to other relievers or other players traded at the deadline.

How expensive was it? Please find an email from me to Chris Crawford, and Crawford’s responding email below:

Email from me to Crawford:

Hi Chris- quick question for you. Which package do you think is better, the one the Yankees got for Chapman or the one the A's got for Hill and Reddick? And, to follow up, how close are they?

Email in response:

I like the Yankees package for Chapman substantially more. I like Holmes Montas and Cotton, but none of them offer the upside of what Torres offers, and McKinney has a chance to be an everyday outfielder or a really good fourth.

As far as how this compares to prospect returns other than the Hill/Reddick return, well, Chris is a busy guy and I didn’t want to bother him too much, so we are left with my far from expert, nearing on ignorant, based entirely on reports I read on the internet opinion on prospects. That said, I’d say that the Chapman return significantly bests the returns for Carlos Beltran and Mark Melancon. I’d also say that while it is less than the return for Andrew Miller, Miller comes with two extra years of team control and a percentage chance of being worth a qualifying offer. Compared to the Jonathan Lucroy and Jeremy Jeffress return, the Chapman return is certainly less, but the Rangers are getting two years of Lucroy and three years of Jeffress. Again, I get why the Cubs—an incredibly smart organization, maybe the smartest organization, and probably the best run organization we have seen this decade—traded for a reliever, even paid a premium for one, but why choose to pay the most expensive price (relative to what is being received) when other options were available? We’re gunna take some guesses answering this below.

1. Supply and Demand and Timing
The Cubs had no real need for a bat or a starting pitcher, but there was definitely room for improvement in the bullpen, particularly for a lefty. Unfortunately for the Cubs, and fortunately for teams with elite relievers, demand is high around the deadline for elite relievers because (i) every team in playoff contention can improve by adding an elite reliever and, maybe, (ii) the impact of elite relievers was on full display the last two postseasons with the Royals. Demand was high, so prices were higher than they would have been had demand been lower. Additionally, the Cubs were buying when supply was limited. When they decided to trade for Chapman, it was not clear whether Chapman was even available and it was likely that Miller was going to be kept. The same goes for Melancon. And it is even possible that the Brewers were holding onto Jeffress if they needed to bundle him with another player to maximize their return. Lastly, if the Cubs were set on adding a lefty in addition to Mike Montgomery, then the supply of solid lefties available drops to Will Smith and Chapman.

Not only did supply and demand drive up Chapman’s price, so too did timing. With, as mentioned previously, Miller and Melancon not yet on the market and sellers not as fully motivated as they likely would be at the deadline, the Cubs bought when supply was not at its highest. It is easy to say that they mistimed the market. This ignores, however, the composition of the MLB trade market. We cannot analyze timing the MLB trade market the same way we analyze buying a stock from an ETRADE account. We cannot do so because a stock market comprises thousands of buyers, very few of whom have enough might to sway an entire market, whereas the MLB trade market is made up of very few teams. The result of this is that demand lessons as soon as the Cubs leave the market, so the somewhat decreased prices paid by other teams is expected. Lastly, these negotiations (note: I am assuming here) are not like buying milk at the store. There is no set price, and, therefore, teams can charge different prices to different teams and may very well charge higher prices to teams that want or need a player more than other teams. That said, the Cubs know all this, so why not wait until another club pays up or until the sellers bring down their price? Well, that question brings us to an attempt to answer it below.

2. Loss Aversion and Decisions Framing
Waiting, like anything, comes with risk. There was a percentage chance that had the Cubs tried to time the market Chapman would have been dealt elsewhere, the Yankees would have decided to hold Miller, and the Cubs could have ended up paying a fortune for Will Smith or Melancon. Okay, but certainly the percentage chances of the worst case in this scenario do not make it worth having paid the price paid? That would be my guess, but I would also guess that such analysis is not of importance when a team can practically taste a championship.

Put differently, when it comes to strategy and decision making, how we frame a decision often matters more than the likelihood of the outcomes given the choices we make; the fact that there is a percentage chance often matters more than what is the actual percentage. In the case of the Cubs and Chapman, the chance that they could miss on a World Series victory that they have been building toward for four years because they decided not to pay up for a reliever at the deadline seems unpalatable when put that way.

And this brings us to our old friend loss aversion—the preference to avoid loss over seeking gains. Usually loss aversion, as it relates to trades, would be a deterrent because no team wants to be the one that gets burned and no one wants to be the general manager that gets fired because they got steamrolled in a trade. For a team like the Cubs, the pre-season and current favorites to win the World Series, the loss that they likely fear most and likely seek to avoid the most is doing anything that could prevent them from winning the World Series. In this case, the Cubs likely traded a hefty prospect haul for a rental because failure do to inaction, failure resulting from not bolstering the bullpen would likely be unbearable. When the decision is framed this way, almost any price that does not include talent that will help them win this year seems fair. Of course, when taken to an extreme (as would be trading four years of Kyle Schwarber) this can come to look very ugly, because while Chapman provides them with an avenue to avoid a particular regret, he still comes with no guarantees (the price for a guaranteed championship, I assume, would be much higher). But again, we have changed the way we framed the decision.

These are incredibly difficult strategic decisions, weighing short term and long term goals, and the Cubs front office is one of the best equipped (given their track record and experience) at making those decisions. It is also a position that their partner in trade, Brian Cashman, has quite a bit of experience in; and given how he timed the market (both with Chapman and Miller), it appears his familiarity with the situation allowed him to do quite well for the Yankees in being an outlet for the Cubs to pay a premium price to quell their fears.

Jeff Quinton is an author of Baseball Prospectus. 
Click here to see Jeff's other articles. You can contact Jeff by clicking here

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