Friday, February 13, 2009

Gauging Pitching Values: Overpriced or Underpriced

Anonymous wants to know if the second-tier pitchers in Toz's N.L. expert auction were too expensive.
How far overvalued do you think the second-tier pitchers were? I was wondering if that would happen, just because there are so many Grade A starters in the NL.

I figure some people would pass on those elite guys, then realize those pitchers went for par value. Those owners would then freak out and start bidding up the second-tier pitchers. Do you think that's what happened?

To examine this premise, we need to know what these pitchers earned in 5x5 last year, and what their counterparts earned in the N.L. in 2008.

The charts below list the 30 most expensive starting pitchers purchased in the CBS Sportsline N.L. expert auction this past Tuesday. Pitchers tied in salary use their last names as a secondary sort. The '08 column lists 5x5 earnings from last year. The +/- column tells us whether these pitchers would turn a profit or not based purely on their stats last year.

Two columns I added to give us some other baselines to look at are "Comp" and "4x4". Comp lists last year's starting pitchers who were bought in at least one expert league in descending order. For example, Ricky Nolasco's $27 season is included in this exercise because he was purchased in LABR in 2008 at $1. CC Sabathia's 2008 $26 season (N.L. numbers only) was not included. The idea is to see whether or not owners were placing realistic expecations on pitchers based on last year's earnings.

The 4x4 column is to provide a frame of reference. Generally speaking, the top starting pitchers in 4x4 earn more, the guys in the middle earn about the same, and the guys at the bottom earn less, especially if those guys can strike hitters out.

Top 10 CBS Sportsline N.L. SP Salaries 2009

1Johan Santana
Cole Hamels
Tim Lincecum
Brandon Webb
Dan Haren
Jake Peavy
Roy Oswalt
Rich Harden
Carlos Zambrano
10Chad Billingsley


The way these data are presented can get a little confusing. If you prefer, you can look at the "'08" column and see how much of a raise or pay cut each player actually got. In some cases, though, this is where the "Comp" column is more useful. Zambrano only earned $16 last year, but his salary means that his owner is expecting earnings in the low 20s, and his ranking in the pecking order tells me that those expectations are justified if he lives up to where he's ranked.

So by looking at the Comp column, we see that the pitchers who are actually slightly overpriced are the pitchers at the very top of the spectrum. Tim Lincecum earned more than any other 5x5 N.L. starter in 2008 at $35, yet four starters (including Lincecum) get paid more than $35. If 2009 earnings are similar to 2008's, the top four pitchers will take anything from a $3-7 loss on these pitchers. That's not necessarily significant - there's something to be said for paying a little extra for $30+ worth of stats - but that's still an overpay.

Looking at these pitchers as a group though, the market does an excellent job determing their value. They return 90 cents on the dollar (27/30) using 2008 as a guideline and 93 cents (28/30) using 2008's comparable Top 10 as that same guideline. This makes sense - there's a lot of overlap in the 2008 and Comp list, with six of the 10 pitchers purchased here also cracking 2008's Top 10. Looking at it a little more closely, Harden would have made the 2008 Top 10 with his combined 2008 N.L. and A.L. earnings, Billingsley was 11th, and Peavy was 12th. The only pitcher here who is getting a big raise here based on his 2008 is Zambrano.

Next 10 (11-20) CBS Sportsline N.L. SP Salaries 2009
11Matt Cain
Yovani Gallardo
Derek Lowe
Ricky Nolasco
Javier Vazquez
Edinson Volquez
Adam Wainright
Ryan Dempster
Josh Johnson
20Chris Young


Pitcher by pitcher, there is a lot more fluctuation here. Only three pitchers (Lowe, Volquez, Wainwright) see their salaries stay somehwat in line with what they earned in 2008. Gallardo gets a fat $18 raise, while Dempster takes an $8 pay cut.

Based on expectations, though, the bids are once again mostly in line with 2008, particularly on the top and bottom pitchers in this group. We know that all of these pitchers won't pitch to their bid prices, but if they did, the ones in the middle are a little too expensive based on what their 2008 counterparts earned. The $20 bids should be $16 bids if the market believes that these are the 14th-17th best pitchers out there, while Dempster should be $4 cheaper as well. It isn't until Josh Johnson that the market "corrects itself".

Once again, though, as a group the second tier of pitchers isn't actually "overpriced". They bring back 85 cents on the dollar using their 2008 combined earnings as a baseline and 90 cents using their 2008 counterparts.

Next 10 (21-30) CBS Sportsline N.L. SP Salaries 2009
21Max Scherzer
Aaron Harang
Ted Lilly
Brett Myers
Clayton Kershaw
Mike Pelfrey
Oliver Perez
Jair Jurrjens
Ubaldo Jimenez
30Randy Johnson


Now the market catches up both to what these pitchers earned in 2008 as well as what the 21st-30th N.L. starters purchased in 2008 earned. Since the first two groups of pitchers were slightly overpaid, I'd assume that the bottom pitchers will be slight bargains compared to their '08 counterparts.

As it turned out, the pitchers in Sportsline were slightly overpaid in both the first and second tiers, but not by very much. There wasn't a panic or a run at all. Just some slight overpays here and there.

I could see why anonymous would think the pitchers in the second tier were overpaid. Compared to the 10 most expensive pitchers, their earnings were all over the place. And - if history repeats itself - they will be overpaid.

Earlier this winter, I looked at last year's most expensive pitchers in groups of 10. The Top 10 pitchers broke even as a group, the next 10 lost $6 per pitcher. 2007 was even more radical, with the 10 most expensive pitchers once again breaking even and the next 10 most expensive losing $10 per pitcher.

Keep in mind that the prices in Sportsline
are a little higher than they are in the more famous LABR and Tout Wars expert leagues. Last year, the Top 10 pitchers in Sportsline cost $29 per pitcher, compared to $25 in LABR and Tout. The next 10 most expensive cost $18 in Sportsline compared to $17 in LABR and Tout.

So I'd expect the prices on the top pitchers to level off in those later expert auctions. But based on past performance on these lists, anonymous is probably correct that they shouldn't. Based on what pitchers earned in 2008, the prices on the second tier of pitchers are right in line. Based on how unpredictable these pitchers are compared to their first tier counterparts, they are way too expensive.

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