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March 25, 2005

Fantasy Focus

Inflation in Keeper Leagues

by Erik Siegrist

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Auction leagues, at their economic heart, are a wonderful example of a functioning free market. Owners bid for control of resources (players), each of which produces a different mix of commodities (stats). Whichever owner does the best job of managing their resource acquisition will have the strongest portfolio at the end of the fiscal year (season), which is everyone's ultimate goal.

In keeper leagues, however, there is a regulatory shadow cast over that heart. Well-drafted minor leaguers are locked up cheaply, below their perceived market value, and might not be up for bid until well into their primes. Similarly, a previous year's auction bargain could be hidden away, further tainting the market's essential purity.

OK, enough of the sturm und drang. Keepers are pretty nifty, really, adding all sorts of strategic wrinkles to the rotisserie format. And one of the biggest wrinkles--the one that can completely derail your auction strategy if you don't prepare for it adequately--is inflation.

Auction leagues, like all markets, are driven by supply and demand. Inflation is the product of reduced supply (fewer players available at auction) colliding with increased demand (owners with more money to spend thanks to what they saved on undervalued keepers). If it sounds scary...well, that's because it can be, as other owners take the bidding on your target players so high you'll start thinking about hiring a sherpa to keep up. With the right preparation, though, you can be the one making your fellow owners dizzy.

To approximate the rate of inflation at your auction table, you'll first need a list of the players everyone in your league is keeping. Once you have that list, the actual calculation is back-of-the-envelope stuff: (Total League Salary Cap - Keeper Salaries) / (Total League Salary Cap - Keeper Values).

Let's say you're in a 10-team, AL-only, 5x5 keeper league, with traditional $260 salary caps. Your league commissioner sends out the list of players being kept from last year's rosters, including any long-term contracts to which they've been inked. You add up the 2005 salaries for all the keepers, and find it comes to an even $600. When you add up their projected values for 2005, however, you get a cool grand ($1000), a $400 difference. The approximate rate of inflation at the auction, therefore, will be 25%--($2600-$600)/($2600-$1000), or $2000/$1600.

That rate of inflation isn't something you can simply apply across the board to all available players, however. For one thing, very few leagues use denominations smaller than a dollar. $1 players won't suddenly be receiving bids of $1.25; they're going to stay at $1, along with all those other end-of-auction $2 and $3 players. And just like a certain hoary old computer hack made famous by Richard Pryor and David Herman, all those fractions of dollars have to go somewhere--in this case, towards more expensive players.

A bigger factor than that is basic psychology. Most owners will view the money they are saving on their keepers as a kind of "war chest," and as such will want to spend it on players worth going to war over. Nowhere was this more evident than in Tuesday's RotoWire Staff Keeper League auction. The talent pool, aside from most of the top shortstops (Miguel Tejada, Nomar Garciaparra, Derek Jeter, Edgar Renteria and others were all up for grabs), was extremely thin, and as a result bidding on the cream of the crop went through the roof:


Player           Salary
Miguel Tejada      60
Pedro Martinez     59
Alfonso Soriano    57
Derek Jeter        50
Nomar Garciaparra  49
Lance Berkman      42
Mark Prior         39

As you can see from those last two names, even injured superstars fetched a pretty penny, despite their uncertain status for Opening Day. This is the most important thing to remember when dealing with inflation: the bigger the name, the bigger the impact on the price.

But that brings up an interesting question. Just because you can spend $60 on a star player, does that mean you should? This is, after all, a keeper league, and on some level you need to decide with every bid whether you're going to want to hang onto that player in 2006, or whether you're willing to take on a potential one-year rental. Tejada, for instance, also went for $60 in the 2004 auction. Even at his best, he couldn't earn back that much money, and as a result was tossed back into the free-agent pool.

In leagues where inflation is running rampant, what you'll have to look for are relative bargains--players who aren't getting paid too much more than their projections, and who might even turn a profit for you if everything tumbles your way. PECOTA's Breakout and Improve Rates can be a big help in identifying players who might fit that bill, of course. I especially like my second-biggest purchase of the auction, Austin Kearns at $23, in that regard, given his juicy 31.4%/64.1% B & I Rates.

Hitting the jackpot on one or two of those players won't just put you in a better position for next season--they'll help bring home a title in this one.

--

Erik Siegrist is a beat writer for RotoWire, covering the Marlins, Nationals and White Sox.

Related Content:  Undervalued Players,  Rental Players

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