Does the scenario below sound familiar?
You go into your auction with a strong freeze list but inflation is high, at about 40%. You're not worried, though, because everyone is going to get hit by the same inflation, and you're confident you'll still have the best team coming out of the auction.
Three rounds into the auction, and you're tickled pink. You paid $50 for Soriano, $44 for Carlos Lee, and $35 for Peavy early, and they're all a couple of bucks under your inflation prices. True, you're almost out of money. But you've been through enough of these auctions so you know what'll happen next. Since players are going under inflation prices, the league has no choice but to start paying prices over inflation.
"Yeah, I'm tapped out, but I got all three of these guys under inflation prices," you tell your buddy outside during the first break. "All I have to do is wait for dollar derby and I'm sure a couple of bargains will fall in my lap."
Three more rounds into the auction, and you're suddenly not so sure. It's not so much that inflation hasn't gotten worse, it's more that prices are fluctuating all over the place. Someone desperate for a catcher paid $22 for Michael Barrett, which put a big smile on your face, but another owner got Adam LaRoche for $19, which was under not only your inflation price but your pre-inflation bid limit as well. The same thing's happening with the pitchers. Someone paid $30 for Zito, which is way too high, but then the next player to go was Chris Capuano at a cool $16...just $1 over your bid price.
After 9 rounds, you know you're not going to win this year. The fluctuation in value continues, but all you see is red, because every second or third player is a huge bargain by your reckoning. Xavier Nady somehow slips in for $9. Aaron Rowand goes for $14. Josh Willingham goes for $12. What the hell is going on?
Worst of all, after 7-8 rounds of sitting on your hands because you had no money, the pickings in the end game are slim to none. You grab a couple of players that you had at $2 on your sheet, but that's not enough to make up for some of the bargains that flew by in the middle rounds. You've got 7 starters on offense and a lot of holes. Your pitching staff has the same problem. Peavy and a $8 frozen Chris Young is a nice start to your rotation, but you had to roll the dice on a bunch of $1 endgame pitchers to fill out your staff. Even before the season starts, you've got a ton of trades to make, and not enough players to fill the holes.
Why does this happen?
I talked earlier about bid limits. Bid limits can be used to set preferences on players, and your bid limit can easily get a player if you set it high enough. If most of your league thinks Lance Berkman is worth $32 and you believe he's worth $37, you will buy him. Better yet, you'll buy him at $33, since everyone else will drop out once the bid hits $32. In theory.
Now, taking the example of 40% inflation from above, if your league thinks Berkman is worth $45 with inflation and you believe he's worth $52 with inflation, you should be able to buy Berkman for $46.
So inflation not only increases the prices on the top guys, it increases the variability on every player in the auction. More importantly, the higher the inflation, the greater the chances you might get a bargain in the auction.
Specifically, there is greater variation of opinion amongst the second and third tiers of players. Check out any magazine or web site, and I guarantee you'll see at least 8 of the same 10 hitters in the Top 10. Carl Crawford and Vlad Guerrero aren't going to be off this list in the A.L.; Jose Reyes and Albert Pujols will definitely be Top 10 hitters in the N.L. no matter which expert you consult.
Now look at hitters 60-70. I'm willing to bet that there are only 2 or 3 hitters that are similar from one magazine to another. Why?
Opinions simply begin to differ more and more as you reach down into the lower rungs. A $5 difference on my bid for Shea Hillenbrand and your bid doesn't sound like much. But if I get him for $12 I'll be pretty happy, while you'll think I overpaid slightly.
Most importantly, this goes back to Mike Fenger's comment about the end game. In a league where hitters you have valued at $4 or $5 are going for $1, you can bid big on the top players and then wait for the bargains at the end. However, you can't do that if your league (like mine) only has true $1 or $2 players waiting for you. The modest profit you'll get from your handful of stars will be neutralized by your lack of profit in the end game. Most leagues with higher inflation actually see the bargains in the middle and not at the end, since that's where the most variability is. Your $16 Chris Duffy may seem like a bargain to you at $11. If I have him at $9, then I think you're overpaying.
So how do you plan for your auction if there is inflation?
I advise starting out by applying inflation as a percentage for every player and then adjusting your bids. Don't waste your time sticking a $60 bid on Albert Pujols unless you absolutely need him for your team. Take a couple of dollars off the top players and redistribute them across the rest of the league. This isn't to say that you can't own a top player, but realize that an inflation bargain will most likely be a real dollar loss (i.e. Pujols at $60 might be below inflation, but Pujols will never earn $60).
This is the same exercise as adjusting your bids. You are expressing preferences about which players you want to own. You also want to make sure that you fill out your roster and don't let inflation bog you down with two or three players that are under value but only by $1 or $2. Remember that the goal is to spread value across your team, not just to one player. If your team has a $260 baseline and you only add $10 in value, you won't be competitive. A more balanced Roto squad actually gives you to chance to add more to your baseline. Adjust your inflation bids accordingly.