Tuesday, March 29, 2011

DRAFT INFLATION

posted by Scootron

Draft Inflation is one of the least understood concepts in all of fantasy baseball. Some people try to ignore it, which is about as practical as ignoring gravity...you do so at your own peril.

A fantasy auction is not, as some claim, an example of a free market. Demand is fixed. We can have no more than five outfielders or two catchers (without using the UT slot). On the other hand, we must have no fewer than five outfielders and two catchers. Supply is fixed...in the AL, we have 25 players each on 14 teams to choose from. Most importantly, the amount we spend is fixed. No matter what, we all have the same amount of money. But even though supply, demand and funds are finite and predetermined, the possible scenarios are practically limitless, more so in a keeper league.

I have heard owners say things like “Boy, the price for speed was inflated today”, or “Rangers will have inflated salaries since the auction is in Dallas”. I even heard one owner in a redraft league talking about what he expected the inflation rate to be in his auction. But, the cost of a single category cannot be inflated, nor can the salaries of a certain team be inflated. And pre-auction inflation cannot exist in a non-keeper league. What these owners were talking about were league preferences or tendencies. Your league may pay a lot for ace starters, or the top closers, or the speedsters, or whatever commodity is in the shortest supply. Every league is different. But when it comes to inflation, all keeper leagues are alike in the important particulars.

Inflation is a function of the value (projected) of the players frozen and the cost (actual salary) of those players. These two factors determine how much money will be chasing how much value in the auction. Assuming the value of the players kept is, in the aggregate, greater than their cost, inflation results.

Inflation should always be calculated as part of preparation for an auction in a keeper league. Calculated, not estimated or guessed. You can calculate it with reasonable accuracy even before the freeze date, provided you can fairly well project what the other owners’ freeze lists will look like. (And yes, projecting all the other freeze lists can be valuable part of auction preparation.)

It is simply calculated. Let’s use a mixed league example. A 15-team $260 mixed league has $3900 in salary dollars to spend. The non-inflated value of the 345 players frozen and to be purchased in a mixed league auction is also $3900. (This is a tenet of fantasy baseball...that the value of the players selected equals the total of dollars to be spent. I can go into this more deeply, but for now let’s just assume it is true.) For purposes of this example, let’s say the total projected value of all keepers in the league is $2060, and that the total salary dedicated to those keepers is $1363. To calculate a league’s inflation rate, you first subtract the total projected value of the keepers from the total value of the player pool, which gives you $1840. Then you take the actual cost of the players kept, and subtract this sum from the total league salary, which gives you the sum of $2537. So, you have $2537 auction dollars chasing $1840 worth of non-inflated auction value. This difference is what drives the price of players upward. Divide the auction dollars by the auction talent ($2537 divided by $1840), and you get 1.379. That means the league inflation is 37.9%.

Every player’s projected auction value must be increased to account for a this inflation rate. A $45 Crawford becomes a $63 Crawford. The $20 player now becomes a $28 player. A $1 player remains $1. The reason this player is a $1 to begin with is that only one person is able or willing to spend a dollar on him.

So, what do you do about inflation? Some owners may decide not to pay the inflated prices demanded by the auction. These owners will not get any of the best players. Eventually, they either give in and pay the inflated price, or they will wind up at the end of the auction with a large amount of money and little or nothing to spend it on.

As mentioned in a previous article, the object is not to come out of the auction with a team worth $260. The object is to come out of the auction with a team which will make a profit. But each dollar you spend on a player above his projected value reduces the overall value of your team. If you have $60 salary tied up in your keepers, have $200 to spend at the auction, and the inflation rate is 25%, then you should get only $160 in value for your money due to inflation. This would knock a big hole in the profits you have in your keepers. (The math on this threw me for awhile. I kept getting $150. But you’re not discounting $200 in salary by 25%. You are increasing the cost of $160 worth of players by 25%. It works. You can try it yourself.)

Keepers create profit. Inflation takes it away.

The task then becomes finding a way to counteract this phenomenon, or as the lapel buttons during the Gerald Ford administration said, “WIN" for "Whip Inflation Now”. This can be done, so long as you have a solid handle on player values and have calculated inflation accurately. But you have to be confident of your calculations in this regard.

Here are some things you can do, which will depend in part upon the knowledge and tendencies of the other owners in your league. These tips or strategy are designed primarily for leagues with very high inflation, which I consider to be 40% or higher.

In many auctions, the first people thrown are the biggest stars. I fully expect Albert Pujols to be nominated first in my mixed league auction this Saturday. Sometimes owners are hesitant to bid big on the first few players. They may be unwilling to bid the full inflated value on these early players. (They may decide that they want to wait “until the inflation goes down”.) But if your calculations show the inflated value of Hanley Ramirez to be $53, and he’s going once, going twice for $42, you have a chance to step up and get a substantial bargain. His non-inflated value might be only $36 in your league, but if you have grabbed him up for $43, you have added profit to your team.

Some leagues are much more savvy to inflation, and will not let those big stars go for less than their inflated values. Instead, these leagues will actually pay more than the inflated values for the big name players. They may believe, as some do, that inflation impacts the highest priced players disproportionately. They may think the key to winning is having big stars regardless of price. Or they may just have a serious desire to roster Albert Pujols. Whatever the reason for this tendency, you can use it to your advantage.

The dynamics of an auction in progress can impact the inflation rate. As mentioned above, the thing to do when the auction starts with owners paying less than the full inflated rate for players, this is the time when you step in and start buying players. The inflation rate will actually under circumstances. However, if owners start off paying more than the inflated value, inflation will begin to decrease. This will eventually yield bargains among the second tier players, as the owners have overspent. Patience is required for this to work, and you have to make certain there adequate value still on the board. Your money will do no good if there are no players to spend it on.

But what an auction in a league where the other owners have calculated inflation and are buying players at or near the inflated value? Finding profit is harder to do in this case. One thing you can do is to nominate a second tier player while there are still more valuable players available at his position. The other owners may not bid as aggressively on this second tier player if they have their eye on one of the higher value players. But, you cannot wait too long; you cannot wait until after all the stars are gone. If you do, you’ll be going up against owners with money who will bid your guy to full inflated value, or more, if position scarcity is a consideration.

You may also have some guys you are sitting on, guys you have picked to outperform what is expected from them. I would recommend sitting on these guys for as long as possible, only throwing them out when necessary. Of course, you may find that some other owner may be sitting on the same guy, in which case you might wind up in a bidding war.

Inflation rates vary from league to league and from year to year, depending upon the quality of keepers frozen. Some leagues have minimal inflation, near 10%, while other leagues may have inflation rates of 40%, 50%, even 75% or higher. Some owners feel that hyper-inflation can detract from the enjoyment of the league, and I have seen that happen. So where does super high inflation come from?

Various factors can contribute to extremely high inflation. There may be a large difference in skill levels among owners, with more resourceful owners picking players in the auction or reserve draft at salaries which make them superb keepers. It may be that the league has a keeper policy that is very liberal, such as being able to keep players for lengthy periods with minimal salary increases. Some leagues don’t assign substantial salaries to the players taken in their reserve draft. Some leagues have free agent or waiver procedures that increase the number of top keepers. Some leagues don’t start the contract of minor leaguers to running until they make it to the majors or even until they lose their rookie status.

There are some things you can do in your league if inflation is a concern in these areas. Make all contracts commence running at the time the player is acquired, and limit contracts to three years. If contracts may be extended, they should cost a substantial amount during each year of the extension. Assign substantial salaries to reserve draft rounds, such as $15 for the first round, $10 for the next few rounds, etc. Make the contracts of minor leaguers start running immediately. Require a minimum bid for free agents, such as $5. Don’t allow free agent bidding after the rosters expand in September. (Some of these ideas have been around since the beginnings of leagues with active rosters and large reserve rosters. Whether you utilize them or not can determine in large part what your league’s inflation rate will be. Semi-related note...I read recently of a league which misconstrued the language of their borrowed Constitution, resulting in their belief that a player being traded started a new contract clock. So, owners would wait until the third year of a contract, and then trade that player to another owner for a player in his third year. All the best players in the league had been under cheap contracts for years and years. They didn't understand why they had such massive inflation. They were shocked to learn the reason, and moved quickly to correct that misunderstanding.)

Whether you like it or not, inflation is a part of the game if you play in a keeper league. How you deal with it can determine whether you are a contender or a cellar dweller.

Well, that’s it for this week’s article. I hope it has deepened your appreciation of this topic, or at least has reminded you to be aware of the impact inflation may have in your upcoming auction.

Do you have any stories of crazy inflation in your league, or your own tips for beating auction inflation? Let's hear them in the comments section. I may have a new crazy inflation story or two after this weekend.

Good luck, and have fun!

Labels: , , ,

IF YOU LIKE IT, SHARE IT!

10 Comments:

Blogger --r said...

You say that a single category cannot be inflated. Why not? Steals have value. There are a limited (projected) number of them. If Bourn, Pierre, and Crawford are all kept for cheap, intuitively, isn't that going to raise the price on Ellsbury more than Miguel Cabrera?

Of course, you'd have to calculate a value for stolen bases versus a value for HRs. I've been trying to find a tool to do this for a while now, unsuccessfully. Is there something off in my logic? I can't figure out why this isn't done.

Thursday, March 31, 2011 at 9:48:00 AM EDT  
Blogger Scootron said...

This is a very interesting question, and one I have struggled with quite a bit. As you suggest, my position may seem counter-intuitive, so let's explore the issue. I may have to break this response into two parts to make it fit the character limit.

There are a limited number of steals. But that number is the same, regardless of whether they are frozen steals or steals available in the auction. Let's put it in the context of closers, which is easier for me to wrap my head around.

Say, for example, that in your league Soria is worth $20 before any calculation of inflation. Let's say that inflation calculates at 10% Say further that every single closer in the league is frozen except for Soria. Five of the twelve owners have no closer. Does that make Soria worth more? No. His projected statistics have not changed. Now, a couple of things could happen. Those five owners without closers could all decide to pursue him at virtually any cost. The bidding could go to $60 for Soria. Does that mean Soria is worth $60? It does in the sense that market value is in many ways determinative of value. But is that increase due to "inflation" as the term is used, or is it due to supply and demand parameters created by owner actions and/or tendencies? What if four of the five closer-less owners decided to punt saves and Soria went for $1? Does that mean his production is worth less? You could argue that it is, but that wouldn't constitute deflation.

In the ebb and flow of an auction, there will always be times where there are inefficiencies in the process. The last decent shortstop might go for three times his projected value. Does that mean that the price of shortstops has become inflated. Well, yes, in the very limited sense of that player's price being pushed way beyond his value.

I think the crucial distinction is between an isolated increase in the price of one player or one type of player due to particular circumstances of the auction or due to owner tendencies/preferences, and an overall increase in player prices which is driven solely by impact of keepers. The former is, in mind, not considered inflation. And, of course, there is no way to calculate it in advance. The latter is what I consider to be inflation. It affects the league as a whole.

So, addressing your example directly, yes there is a good chance that Ellsbury's price will be higher than Miggy's price. But it shouldn't be. Whoever pays over the inflated value for Ellsbury will have hurt the overall value of their team.

Thursday, March 31, 2011 at 10:41:00 AM EDT  
Blogger Scootron said...

(Part Two)

Now, a different twist...we can all come up with a set of circumstances that might lead owners to pay over inflated value for a certain player or players. Part of that relates to the fact that all player values are subjective and conditional. By that I mean that player values are merely projections and very imperfect projections. But, more importantly, the actual value of a player can't be determined until the year is over. Even then, the concept of value only has meaning in the context of your particular league. Let's say you traded for Soria in your league at the All-Star break, and the four points in saves he gave you allowed you to win the league. Let's say that I also traded Soria in my league, but the saves he gave me didn't allow me to catch the owner ahead of me, so I stayed where I was in the standings and didn't win. Does that mean Soria was more valuable in your league than mine? Yes, in the sense that his performance put you over the top. No in the sense that his on-the-field performance was what it was, regardless of the impact it had on the millions of leagues in the country.

In that sense, you might decide that Ellsbury is worth more than Miggy because of what you think he can do for your team, and he might provide that value for your team. But I know that there is no way to calculate or prognosticate the impact each and every player could have on league standings based upon freeze lists. We do know, however, that the inflation created by keepers worth more than their salary can be calculated, and that if you don't recognize it you can wind up getting steamrolled in your auction.

You have raised a very interesting point, and I'd like to continue the dialogue, or have anyone else join in.

Maybe part of the problem is in the name. Maybe we should call it "Keeper Inflation" to indicate that we are talking solely about the increase in auction prices due to cheap keepers. Then, if there are other types of inflation which we can objectively identify and project, then we can figure out how to deal with those other forms of inflation.

Thanks for your comment. It made my day, and gave me a lot to think about. I hope my response has fairly addressed your question, but please let me know if there are other issues you would like to discuss. I like having this blog as something that sparks conversation and intellectual investigation, rather than us just writing articles about what we think. I'm going into my 26th year of fantasy baseball auctions, and I learn something every single year.

Thursday, March 31, 2011 at 10:42:00 AM EDT  
Blogger Scootron said...

This comment has been removed by the author.

Thursday, March 31, 2011 at 10:45:00 AM EDT  
Blogger Scootron said...

I wanted also to speak to the issue you mentioned about a tool to measure individual counting stats like steals, home runs, etc. I'm not an economist or a mathematician, but I tried for 15 years to develop such a tool or formula. Every time I thought I had it made, it would fall apart in an actual auction context.

I know there have been some brilliant fantasy baseball writers who have addressed that subject, but to be honest the math was over my head.

Thursday, March 31, 2011 at 10:58:00 AM EDT  
Blogger Duke said...

Shouldnt it be based on the value of unkept players as opposed to the value of kept players? So instead of $2,060 it should be the value of remaining players (based on roster spots that need to be filled.

Thursday, March 22, 2012 at 2:41:00 PM EDT  
OpenID cf85150c-7842-11e1-8c59-000f20980440 said...

ok, so i ran the numbers of my league with your calculations. we have 1090 worth of keeper salaries, and the "actual" draft value of those players is 1245. so that would give me a number of 155.5. the total league dollars is 3120, and subtracting the keepers from that give me 2030. dividing 2030 by 155.5 give me 15.0547. which makes pujols ($44.4) in my league worth $579.6. am i missing something?

Tuesday, March 27, 2012 at 3:27:00 PM EDT  
Blogger Scootron said...

Yes, I think you are missing something there. Your league must have 12 teams, since there are $3120 in salary dollars to spend. You said the total projected value of all keepers in the league is $1245, and that the total salary dedicated to those players is $1090. To calculate your league's inflation rate, you first subtract the projected value of the keepers from the total value of the player pool. ($3120 - $1245 = $1875) Then you take the actual cost of the players kept ($1090) and subtract this amount from the total league salary. ($3120 - $1090 = $2030). This means your league auction will have $2030 auction dollars chasing $1875 worth of players. This difference is what creates inflation, driving prices upward. To figure the inflation factor in your league, you just divide the auction salary dollars by the auction player value dollars ($2030 divided by $1875) and you get 1.08. This means your league inflation rate is a very mild eight percent (8%). If your calculations have told you that the non-inflated value of Pujols is $44, then his inflated value would be $47.52. You can round up or down, unless your league uses increments less than a dollar.

A couple of things...in order for your inflation calculation to be accurate, you must start with accurate values for the players being kept. This, of course, is somewhat subjective, but make sure they are values you are comfortable with. The other thing is that if you have 12 owners with $3120 to spend on player salaries, then the value of the player pool must be $3120. If you use 23 players per team (276 total) then the value of those 276 players must equal $3120. If you have anything higher or lower, your calculations will be off.

In summary, I'm not quite sure where your calculation took a wrong turn, but what you should be doing is first finding the value of the players in the auction, by subtracting from $3120 the value of keepers. Then you find the amount of salary which will be available in the auction by subtracting from $3120 the cost of the keepers. (The second number will always be larger than the first, unless your league has keepers worth less than their salaries.) Divide the second number by the first, and you have league inflation. It will always result as a figure over 1. Take the first two numbers to the right of the decimal and that's your inflation rate expressed as a percentage.

I hope this helps. If not, let me know and we'll look at it again.

Good luck in your auction.

Friday, March 30, 2012 at 11:56:00 AM EDT  
OpenID scifi451 said...

I know this is an old article but I found this when I was google searching for Keeper Inflation.

I am trying to calculate keeper inflation for my 12 team keeper league. Each team gets $260 for the auction and we are able to keep up to 9 MLB Players. We are starting our fourth season for this league this year. I have been using this article from Fangraph’s to help guide me on how to do it.
http://www.fangraphs.com/fantasy/how-to-account-for-keeper-inflation-in-your-auction-draft/

These are the calculations I have done.
9 Keepers per team able to be kept 9*12 108
Total Players actually kept 97
Total Cost for Players that have been kept 1072
Total Market Value for Players kept 1827
Total League Budget 12*260 3120
Remaining League Budget 3120-1072 2048
Remaining Value Available 3120-1827 1293
Remaining Budget 2048/ Remaining Value 1293 1.58391338

So it looks like I have a keeper league inflation of 58%. Did I do these calculations correctly?

Tuesday, March 3, 2015 at 12:55:00 AM EST  
Blogger Jon Williams said...

Just spotted this, I'm not as active as I used to be. Looks ok to me, you have nearly 800 of surplus value in your league's keepers. Your keepers are nearly half price! That extra cash has to go somewhere.

Saturday, August 8, 2015 at 11:34:00 AM EDT  

Post a Comment

Subscribe to Post Comments [Atom]

Links to this post:

Create a Link

<< Home