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March 24, 2014

Fantasy Freestyle

Is it Really All Currency?

by Jeff Quinton


Is it really all currency?

Acquire the most talent for as long as possible as cheaply as possible. Put differently, acquire the most value first, and then worry about filling needs later. “It’s all currency” is common wisdom in the sports world and the fantasy sports world. In theory, if player A is worth $15 and fills a need and player B is worth $20 and is redundant, player B should be selected and traded for $20 worth of need. In theory, player B can be traded for player A and an extra $5 of value. “In theory” works for nerds like me in lecture halls and the words in books, but when you are out in the real world playing a game on the internet based on a kid’s game being played by grown men called fantasy baseball, theory does not always hold. The “always take the most value regardless of need approach” is based on two assumptions that do not necessarily hold in every league in the fantasy baseball world. Those two assumptions are below:

  1. Every fantasy baseball league is a perfectly competitive market, meaning buyers and sellers are always available to meet respective supply and demand
  2. All owners are perfectly rational, perfectly self-interested, and have perfect self-control, meaning that owner will always be willing to trade one dollar of value for two dollars of value

When these assumptions hold or hold for the most part, you should always take the most valuable player (player B in our example). Similarly, there is often profit to be had in taking on excess value in trades and flipping them for larger profits elsewhere. However, when these assumptions do not hold, which they often do not, there may be instances where you are better off taking need over redundant value or devaluing excess value in trades. In being able to identify what causes these assumptions to not hold, we will be able to make better decisions. The most common reasons are below:

Limited Supply and Demand: Unless you play in a league with 50-plus teams, there is going to be limited supply and demand. This means that even if you are willing to accept market value to sell a $20 outfielder or offer market value to buy a $20 outfielder, there is a chance that there will not be respective buyer or seller. The smaller the league and the fewer number of owners that are actively willing to make trades in any league, the more likely this scenario is encountered.

Endowment Effect: A phenomenon of behavioral economics, the endowment effect states that people will value “object X” more if they possess “object X” than if they do not possess “object X.” While I am certainly not the first to mention the endowment effect’s impact on fantasy baseball, it is important to note how big an impact the endowment effect has on the trade market. In fantasy baseball terms, we require more to trade away Alex Gordon than we do to trade for Alex Gordon. Each owner and each league will be affected by the endowment effect to a different extent. The owners who are very affected by this effect are the owners who rarely make trades or only make incredibly lopsided trades. The more of these owners in a league, the more difficult it is to trade excess assets for equivalent value.

League Norms: Each league has its own norms. In some leagues, owners will not make trades until right near the trade deadline. In others, minor leaguers are undervalued by the majority of owners. Sometimes these norms, such as the ones previously listed, will restrict trade. By knowing your league’s norms, you will be better able to properly value potential trade assets.

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Related Content:  Trades,  Fantasy

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<< Previous Article
Pre-Season Predictions (03/21)
<< Previous Column
Fantasy Article Fantasy Freestyle: Bea... (03/20)
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Fantasy Article Fantasy Freestyle: Ear... (03/24)
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Fantasy Article Fantasy Freestyle: Ear... (03/24)

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