March 13, 2014

Fantasy Freestyle

Raise Decisions and the Fantasy Win Curve

by Jeff Quinton

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It is that wonderful time of year when fantasy baseball keeper and raise decisions are in the air. Many keys have been typed about keep, cut, and raise decisions, but today we will be discussing strategy around the opportunity cost of a raise dollar. Why? Because determining the best raise for a player is not simply an “Is player X going to be worth Y dollars for each of the next Z seasons?” decision. Every dollar we spend on a keeper is a dollar that we cannot spend in the auction. The value of a dollar in the auction will be different for each auction depending on inflation. Furthermore, the value of an inflation-adjusted dollar will be different for each owner depending on where his or her team lies on the fantasy win curve. Because we are all familiar with keeper inflation, we will be discussing the latter point.

The fantasy equivalent of the MLB win curve, the aptly named (by me) fantasy win curve denotes the value of an increase in the standings. Below is the fantasy win curve for a keeper league that pays out for first-, second-, third-, and fourth-place finishes, while minor-league draft order is determined by finish (fifth through 12^th followed by fourth through first). Each league will have its own curve based on payouts and league structure, but the below is representative of a standard fantasy win curve for a keeper league (removing non-monetary factors, which do exist, but we will get to that later).

Regardless of the exact win curve, having auction money that will enable your team to move from 10^th to ninth place is not very valuable. Having auction money that will enable your team to move from 2^nd to first place is incredibly valuable. Giving out potential auction money to keepers in the form of a raise in the latter situation has a much higher opportunity cost than it does in the former situation. To illustrate, an example follows:

You own a $5 Josh Donaldson in a 10-team, AL-only keeper league with low inflation. The league has a traditional raise structure, meaning you can keep Donaldson next season at $5, the next two seasons at $10, the next three seasons at $15, etcetera. A four-year, $20-per-season contract is too risky for you, so that leaves you with the three previously listed options. For the sake of the example, let us say that you project that three years of Donaldson at $15 will return more value than two years of Donaldson at $10, which will return more value than one year of Donaldson at $5. So do you give him the three-year, $15/year contract and call it a day? No, you should not; let us go back to the fantasy win curve. The value of the extra auction money depends on your team’s competitive situation. To illustrate, an example within an example follows:

Sub-Example 1: Your team is a year away from competing for first place. Your team’s competitive window is 2015-2016.
Optimal Contract: Three years, $15/yr. The additional bid dollars resulting from a cheaper contract are less valuable than owning a $15 Donaldson throughout your competitive window.

Sub-Example 2: Your team is not the favorite to come in first, but it is one of the four teams with a legitimate chance to fly a flag in 2014. You have some older players and four of your best players’ contracts will expire after the 2014 season. Your competitive window is 2014 with an outside shot in 2015.
Optimal Contract: Two years, $10/yr. The additional bid dollars over the next two years increases your chances at a first place finish by enough that it becomes worth giving up a third year of Donaldson.

A fair question to ask here is, “Why not just keep Donaldson at $5 if your competitive window is really only 2014?” First off, great question. The reason why you should give Donaldson the $10 contract is because his trade value at two years, $10/yr is worth more than the extra five bid dollars (if the trade value is not worth it, then you should not do so, obviously). That said, if you find yourself in such a situation and another owner is willing to give you a more valuable short term piece for three years of Donaldson, then pull the trigger (such a perfect fit does not often exist though). Note that this is only an example; albeit, an example that hopefully illustrates the different factors that should be considered in a raise decision. When making your next raise decisions, make sure to take the following into account:

1. Fantasy win curve
2. Competitive window
3. Opportunity cost of raise dollars (inflation-adjusted)
4. Trade value

Digging a little deeper into the fantasy win curve (and getting away from raise decisions a little), it should be noted that each owner has her or his own personal win curve. Humans are motivated by non-monetary factors; thus, each owner’s non-monetary motivators will affect his or her personal win curve. You and most owners that you will come across can be described by one of the descriptions below:

• Monetary focused (short term focused; long term mindful): This is how I would categorize most owners. They will go for it “a little” when they have a small chance at first, but will not sell the farm unless they have a good, calculated shot. They also rebuild when the time comes, but tend to be faster rebuilders than the long-term focused owners. These owners possess the standard fantasy win curve.
• First place or bust: Similar to the monetary focused owner, but these owners place zero value in non-first place finishes. Their fantasy win curve is very flat until you get to second and first place, where their curve will be more severely sloped than that of any other owner.
• Always going for it: these owners will sell keepers and prospects to make runs, even if their first place chances are near zero. Their fantasy win curve gets steeper earlier than does the standard win curve.
• Building for the long term- the fun of building a dynasty and owning top prospects is more valuable to these owners than an actual payout. In our example, they will always give Donaldson the 3 yr, $15/yr contract, regardless of the situation (unless they can trade him for a prospect they are eying up). Their fantasy win curve is not a curve at all, just a straight line.

First, I will not say that any of these strategies is correct. We play this game for personal enjoyment, and thus, your win curve will be shaped by how you enjoy the playing the game. I will say that if you are interested in having the best chances of winning, “monetary focused” gives you the best shot at accomplishing that goal. Make sure you are taking your win curve into account with your raise decisions no matter what that curve looks like. Lastly, be aware of the win curves of your fellow owners as this will determine who they are willing to deal and when. Unfortunately, I do not have a nice bow to tie on this one, but good luck with your raise decisions and make sure to take the fantasy win curve into account.

Jeff Quinton is an author of Baseball Prospectus. Follow @jjq01
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