Thursday, March 15, 2007

Optimal Bidding: Does it Work?

Many, many, many years ago, John Benson promoted the concept of Optimal Bidding for Rotisserie League Baseball. I'm not sure if he still does, if he's phased out the idea, or if it exists in some sort of modified format.

Benson's theory was that you shouldn't push any of your players to their bid limits. Due to variations in everyone's prices, you would be able to fill out your team with players at 80% of their value.

Under this method of bidding, you could pretty much forget about owning Albert Pujols, Ryan Howard, or any of the superstars in your league. If you had a $36 bid limit on Howard, optimal bidding would tell you to stop at $28. Or $29, if you want to round up. But you wouldn't get any superstars.

But that's OK (Benson said). You would really be looking to fill out your team in the middle rounds with a team of $10-16 players. And you'd be getting bargains with every player you bought, since any $16 player you bought would be worth at least $20, and any $10 player you bought would be worth at least $12.

Does Optimal Bidding work in reality?

I took a look at my American League from last year to see how I would be able to fill out my roster using Optimal Bidding. This assumes no freezes, and a $260 budget. One caveat is that I have to spend my $260. I can't play dollar derby and say that I've filled out my team.

In the interest of fairness, I also did not simply take Patton $ and use them to determine what's "optimal." Instead, I averaged the projections from Rototimes, Baseball Prospectus's PECOTA projections (I had to assign bids) and the prices from last year's LABR.

This is the team I came up with:

C Toby Hall $4
C Ramon Hernandez $16
1B Mike Sweeney $19
2B Mark Grudzielanek $4
SS Alex Gonzalez $3
3B Aaron Boone $15
CO Darin Erstad $8
MI Tony Graffanino $1
OF Gary Sheffield $37
OF Scott Podsednik $30
OF Jeff Conine $3
OF Garret Anderson $17
OF Shannon Stewart $13
DH Kevin Millar $4
P Randy Johnson $31
P Jose Contreras $13
P Todd Jones $12
P Jeff Weaver $11
P Jarrod Washburn $6
P Daniel Cabrera $5
P Carl Pavano $3
P Neal Cotts $3
P Kyle Farnsworth $1

Hey, I've even got $1 left over!

Right away, Optimal Bidding doesn't work. Ramon Hernandez, my second catcher, went for only $1 less than his inflated price of $17, or 94% of his par price. So if you don't pony up the dough for Ramon, you've got no second catcher.

You also wouldn't be able to fill in your OF. Well, you could have, with the likes of Carl Everett, Bernie Williams, Reed Johnson and Nick Markakis. But then you would have left a ton of money on the table. Again, the point of this exercise was to determine if Optimal Bidding is feasible.

In my league last year, you could have filled out your pitching staff using Optimal Bidding. This staff comes in right under the wire, at 79.49% of the par bids for these players. It’s well and good if you can get players below your bid limit. More importantly, does Optimal Bidding win you your league?

This team puts up 119 HR, 621 RBI, 69 SB and a .269 BA. Good for 13 points on offense. Its pitchers get 56 wins, 44 saves, and put up a 4.78 ERA and a 1.37 WHIP. Believe it or not, that's good for 21 pitching points.

So Optimal Bidding gives you a 34 point team. In my league. That would have been good for 10th place.

To be fair, some caveats are in order:

a) Of course, the results might very well be better if I plugged this exercise into another league.
b) No one is going to complete this exercise with $260 filling in a 23 man roster. Freezes will improve on my hypothetical 34 point finish.
c) Benson does point out that Optimal Bidding doesn't quite work out at 80% of your bids in a freeze league (As always, though, he's vague about what the right percentage should be for a freeze league, though he's only too kind to point you to one of his half-dozen other books that he publishes on the subject).

Caveats and 34-point finish aside, do you like this team?

I don't. It seems to me that there are too many "cute" picks here, for lack of a better term. And a couple work out. Grudz and Millar are the nice pickups you hope to make at the end of the auction: guys you spend cheaply on who earn in the low double digits. Todd Jones was a steal at $12 and, even if he flamed out, I can't argue with getting a closer for $12.

But this is a great example of what happens when you do nothing but hunt for bargains. I don't have anything against any of these picks specifically. But too many of these guys are post-peak veterans who are due for some kind of drop-off. You can argue that if Sheffield and Sweeney don't get hurt, and if Johnson pitches more like he did in 2005 and if Anderson and Stewart bounce back that this is a good team. You'll never win with what if.

You want value and production. There's nothing wrong with bidding $35 on Ichiro if you need the steals and average and even taking a slight loss.

My advice is to keep optimal bidding in mind on those guys in the middle. The idea of optimal bidding is useful, if only because you also don't want to buy every player at par. I don't mind paying par or near par for top players because they'll generally produce. If they don't, I know I won't be taking a complete bath, barring injury.

It's the players in the middle (like Stewart, Anderson, Sweeney and Boone) who are in the middle for a good reason. They could continue to produce, but they could also fall off in a hurry. For these players, it's a great idea to stay as far away from par as possible. Some kind of Optimal Bidding could and should be applied here.

For the stars, bid them as close to par as possible. You don't want your rivals to profit from a $35+ player.

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