Examining buyers' trade decision-making through a behavioral economics lens.
While we usually think of teams playing for a championship this season as buyers and teams playing for the future as sellers, the obvious truth is that both teams are selling something. One of my favorite parts about keeper leagues (at least the ones in which I participate) is that there are different types of assets to trade. Teams can trade major leaguers, minor leaguers, and future minor-league draft picks. For sellers, anything that does not have future value, such as players on expiring or overly expensive contracts, will be on the trade block so long as the return is worth the cost (whatever that might be). Sellers might also try to trade assets with future value for assets with more future value. This part is pretty straightforward.
The more interesting part is probably what buyers choose to and do sell. Everyone tries to hold onto their top prospects, while selling more marginal pieces. Then, when buyers are up against the trade deadline, they might sell their more valuable pieces to take a shot at a championship. We discussed the advantages and disadvantages of preempting the normal trade cycle here, so it now behooves us to take a look at the decision-making factors that come into play when trading each of the previously mentioned assets as buyers.
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How to improve fantasy decision-making amid variations in player performance.
At any point in time, players perform well, poorly, and somewhere in between. Their performance fluctuates from at-bat to at-bat, game to game, week to week, month to month, and even year to year. As fantasy baseball participants, we are not really interested in fluctuations and we are certainly not interested in past fluctuations. We are, however, interested in future production. The issue we face is that how we react to such fluctuations, particularly negative fluctuations, can cause us to make sub-optimal decisions. As always, we will take a look at the decision-making obstacle and see if there is anything we can do avoid it.
First off, I would like to say that the best part about writing at Baseball Prospectus is the community and audience that I get to write for. The enthusiasm and intelligence of the readership (at least what I can tell from the commenters) is outstanding. Smart and insightful comments are often the inspiration for my articles and often allow me to better understand the concepts and ideas I am/was writing about. Now they are not all pearls of wisdom, but there ain’t no sweet without the sour.
Anyhow, the three comments from my article two weeks ago, In-Season Advocacy Effect and Managing Multiple Leagues, all brought up interesting points and I figured responding to these questions/points would make for a helpful article (I also apologize for the delay). I figured that if one person is thinking something or asking something, then there are probably others with the same thoughts and questions. At the very least, responding to these comments should help us improve our understanding of these concepts and topics.
Why pinching pennies early in the year might not be the way to go.
I believe something about FAAB spending and waiver-wire activity. I believe that people do not spend their FAAB quickly enough and that they are not active enough on the waiver wire, especially early in the season. So, more accurately, I believe a bunch of things. Around this time last year, we took a look at two behavioral factors that contribute to fantasy baseball participants not being as liberal with their FAAB spending or as active in the waiver pool as is optimal. In my biased opinion, I think the entire article is worth a read, but we can get the gist from the following quote from the article:
Two things about people: (1) We overvalue the things we own and (2) we are afraid of making mistakes that result in loss more than we are enticed by taking action that result in gains. These are the result of the endowment effect and loss aversion, respectively. Both of these factors make us less likely to drop one of our players for a better available player.
How your decisions in one league might suboptimally impact your moves in another.
Many of us play in multiple fantasy baseball leagues. I am sure some of you play in strange, interconnected leagues, but 99.9% of leagues are wholly independent of one another. Consequently, any decision made should be made without consideration of any other leagues. This is all fine and dandy in theory, but as we have seen time and time again, this does not hold in practice. Because we are more concerned with the latter (practice) than the former (theory), we will now take a look at the factors that can lead us astray when managing multiple leagues and then take a look at how we can guard against those factors. More specifically, we will look at why we often end up with the same players on multiple teams, why that is an issue, and what we can do to avoid that fate going forward.
Rethinking one man's assessment of the Padres' offseason brilliance.
In the offseason, I wrote an article titled How the Padres Won the Offseason. That article was written shortly after the James Shields signing and, therefore, less shortly after the acquisitions of Matt Kemp, Justin Upton, Wil Myers, Derek Norris and others. I praised the Padres because they seemed to be acquiring discounted talent wherever they could, regardless of fit, and were thus doing so relatively cheaply. The end product of these moves was the construction of a team that seemed potentially competitive, and at the very least improved, for a price below what anyone would have guessed it would cost to do so. As to what the Padres would do going forward, I wrote the following:
Is it worth striking up negotiations less than two weeks into the 2015 campaign?
It is early in the 2015 baseball season. Any article about baseball at this time must at least try to mention this in good faith. We know the usual early-season fantasy baseball topics: small sample size, overreactions, regression, buying low, selling high, patience, it being cold outside, injuries, etc. We also know the usual, often good advice: Be patient, but not overly patient, check to see if skills have changed not just results, etc. Because trades happen infrequently in the beginning of the season, they are rarely discussed outside of the previously mentioned buy low, sell high framework. However, it probably behooves us to take a step back and view early season trades as they relate to strategy and human behavior in general. The interesting part of early season trades is that the influencing factors do not align; thus, we cannot responsibly advise that anyone seek or avoid early season trades without exception. Rather, it depends on the situation. We will now take a look at the reasons that make these trades potentially beneficial and those that make them potentially detrimental.
A few lessons Jeff learned from his auctions this spring.
Having completed an AL only auction last Saturday and an NL only auction two Saturdays ago, I have three takeaways/learnings to discuss to help us (read: me) in future auctions. They are not big enough to be their own article, but their weak connection is strong enough to form an article. Please find these three takeaways below:
Are clubs getting the most out of their extension opportunities?
Wade Miley, Brian Dozier, Juan Lagares and Christian Yelich are among the most recent round of players to get extensions that cover their arbitration years and not much more. We think we mostly know why these deals happen: teams want to lock in players at below market cost and players want to lock in moneys. The discussion on the benefit to teams mainly centers on the fact that players—being people—are risk averse and overfocused on negative, small-probability outcomes, such as a career-ending injury or becoming terrible. As a theoretical consequence, players accept below-market deals in order to guarantee income.
However, the four extensions listed above did not receive the pro-team praise/anti-labor outrage that past extensions have received. Is this a coincidence? Maybe. Is this just agents and players getting smarter? Maybe. Is this a reaction to an overreaction to the Jon Singleton extension? Maybe (though the author notes that this would be a gross oversimplification of the Singleton situation). Another possibility is that such extensions lend themselves to decision-making errors for teams just as they do for players. More specifically, teams might be overweighting certainty, small-probability outcomes, and positive trends in handing out such extensions.
Jeff starts by taking the players he likes more than our bid values, then fills out his roster with the money left over.
Last year, I got caught in the trap of wanting an impact player in each position-player slot, which led to me taking a lot of lower-probability, upside plays that did not pan out. The problem here was not with risk, but rather with framing my decisions through something other than value. This year, my strategy was to first take all the players I like more than Mike Gianella (the creator of the values) and then tweak my roster if needed in order to avoid any category deficiencies.