March 12, 2015

The Quinton

Choice Architecture and Trade Talks

by Jeff Quinton

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As players get injured and as auctions, drafts, and keeper deadlines approach, this tends to be a busy trade time for many a keeper league. We have talked about framing team needs, looking for trade partners, and honing negotiation tactics, but today we are going to look at how we can optimally structure our trade offers. Why? Because the way we engage in trade talk and the way we structure our trade offers impact how successful we are at (i) making trades and (ii) getting the most out of trades. What follows is a slide from behavioral economics class on choice:

Because we are not in the world of traditional economic theory, because we are out in the real world playing a game on the internet, we can, per the slide, “influence preferences and choices” in how we design the choices we provide to others. The buzz word for this is “choice architecture.” We are going to take a look at some of the phenomenon that affect our (and our leaguemates’) decision making and see if there are ways we can use it to our advantage. More specifically, we will take a look at the (i) tyranny of choice, (ii) decoy effect and compromise effect.

1. Tyranny of Choice

Getting to “productive trade talk” is something often assumed and overlooked, but it can be a major hurdle in completing beneficial trades. Both the owner sending the random Justin Verlander for your Jose Bautista and the owner that puts their entire team on the trade block fail to consistently find productive trade talk. They do so because they respectively underwhelm and overwhelm us with choice. The former is why many shudder at having to go to a restaurant with a prix fixe menu, while the latter is why those same people need “just a few more minutes, please” when deciding between the 419 options at The Cheesecake Factory. Put differently, too little choice is a downer, while too much choice paralyzes us.

Fantasy Baseball Takeaway: Take a look at the needs of your leaguemates (particularly their needs as they perceive them), and start with some options. These options can be player specific or more general such as “one of my relievers for one of your outfielders.” If you find this to be too general, you can use the “any interest in” or “how about a trade centered on” any of these specific players for any of your leaguemate’s specific players. I apologize as many of you do not need this advice, but if you notice you are not getting anywhere with your offers, you might want to take a look at your initial offers.

Now, on to “designing” specific offers.

2. The Decoy and Compromise Effects

The decoy effect is when the existence of a clearly inferior option increases the likelihood of the clearly superior option being chosen. An example (also from behavioral economics class) below:

As you can see, whereas some subscribers might prefer to have only the print version, the above offering makes the print-only subscription inferior by comparison to the same priced print and web subscription. The other advantage is that this makes the print plus web subscription seem more valuable to customers that would have originally subscribed to the web-only option because they are now getting something for “free”.

Meanwhile, the compromise effect is when an option becomes favorable because it is a compromise between the other options. Sometimes it is tough choosing between the $18-22 pastas and the $29-$38 entrees; the $18 linguini vongole seems like a great value, but the braised lamb shank is making your mouth water. If the restaurants want to drive you towards the more expensive entrees (as most do), then menu consultants actually recommend putting an even pricier item on the menu, maybe a $95 porterhouse alla fiorentina for two. The idea is not to get anyone to buy the porterhouse, but rather to make the entrees the “compromise” option.

Fantasy Baseball Takeaway: While the tyranny of choice shows that we will be more successful if we give our trade partners limited options, we may be able to nudge them toward our preferred option using some combination of the decoy and compromise effects. Let us see if we can do so via hypothetical:

Let us say we have two closers both of which you would trade for a fellow owner’s outfielder. We would prefer to trade closer X than closer Y, so instead of just offering closer X or closer Y for outfielder A, we could offer closer X for a player we like even more than outfielder A, such as outfielder B. This makes closer X for outfielder B the “decoy,” while making closer X for outfielder the superior option and potentially the compromise for our fellow owner. So long as the “decoy” is not ridiculous, there is a chance we can influence our trade partner’s behavior

Just as finding an undervalued trade target can improve our team, so too can getting into productive trade talks and structuring our offers in a way to beneficially influence decisions. Luckily for us, preference is not hardcoded as seen above. We go to the Predictably Irrational-well for a quote so nice we will use it again: Dan Ariely writes, “most people don’t know what they want unless they see it in context… Everything is relative, and that’s the point.” So keep contextual factors in mind as you work on those final pre-draft and auction trades.

Sources:

Behavioral Economics class taught by Simon W. Bowmaker, Clinical Associate Professor of Economics, New York University

Ariely, Dan. Predictably Irrational: The Hidden Forces That Shape Our Decisions. New York, N.Y.: HarperCollins, 2008. Print.

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