Adjusting for Super High Inflation

T.J. has a dilemma that I haven't had to deal with in many years: how do you plan for an auction with crazy inflation?

Crazy inflation question. 12-team, NL-only, $260, 14/9. I've gone with a 70/30 ($2184/$936) split for H/P. Teams are allowed to keep lots of keepers. Pitching, surprisingly, has very little inflation, but hitting? Wow. It's gotta be 80%+. Only 2/10 of the top hitters are frozen, but 29/41 of the top hitters are frozen (#42 is Chase Headley). so available talent is very top-heavy. For example, I've got Albert Pujols into the $60s already, and I still have $200 to distribute to the available hitters.

What should I do? Should I have meaningless prices (no one will bid $75+ for Pujols, much less $65+ for Hanley Ramirez, Carlos Gonzalez, Troy Tulowitzki, etc.) that soak up inflation? Or should I move that $200 or so over to pitching, where 16/22 of the top pitchers are available, resulting in probably 30%-40% pitching inflation?

In order to provide some additional context to T.J.'s question, here is a link to an article I wrote about tracking hitting and pitching inflation separately. Not everyone agrees with this school of thought, but when calculating inflation some owners distribute the remaining dollars in their auction based on the league's general inflation, while other owners take the league's typical spending split and calculate two separate inflation rates: one for the hitters and one for the pitchers.

Should T.J. adjust inflation so that it is applied across the board to both pitchers and hitters? I don't know how much money is left in T.J.'s auction, but I'm going to make up some numbers and try to provide a real world example.

Hypothetical hitting inflation: $1200 to spend on hitters, $665 projected value. Projected hitting inflation = 80.5%.

Hypothetical pitching inflation: $600 to spend on hitters, $540 projected value. Projected pitching inflation = 11.1%.

Overall inflation: $1800 to spend, $1205 projected value. Projected inflation: 49.4%.

Using this model, a $40 raw bid value on Pujols would drop from $72 to $60. You're still going to have to pay a pretty penny for Pujols, but the overall inflation is so high that you're probably going to have to chase him to somewhere in this neighborhood...even if you drop out in the low to mid $50s.

Here is another post worth looking at. I wrote about a home league auction where the projected hitting inflation - using a split inflation model - was eight percent for the hitters and 49% for the pitchers. The league couldn't quite push the pitchers up 49%, and the actual rates turned out to be 11% for the hitters and 33% for the pitchers.

T.J.'s primary concern is absolutely correct. Buying Pujols for $62 - while it might be a $10 "bargain" within the context of 80% hitting inflation - is a losing strategy. If you do this, you'll wind up buying one or two big-ticket items and then waiting around for hours until the end game. This might work in a mixed league, but in an N.L-only format, the $1 players waiting for you in the end game aren't going to be worth more than $2-3 per player.

An owner who plays the margins and waits around for the players in the middle has a much better chance of not only getting inflation bargains but "true" bargains against a player's actual earnings. I've talked about this phenomenon in the past. Super high inflation rates create greater variability in the middle. The projections on the best hitters like Pujols, Hanley Ramirez and David Wright seldom vary by more than a $1-2. However, the projections on the players whose bid limits are $10-15 often vary a lot. If you have Jason Bartlett with a $9 raw bid, his 80% inflation bid is $16. If you have a $14 raw bid on Bartlett, he's now worth $25 with 80% inflation. If Bartlett goes for $20 and your inflation bid was $16, you'll think your opponent overpaid. If your inflation bid was $25 on the other hand, you're going to believe that you grabbed a $5 bargain in the auction.

Based on my real world experience, I would move some of the raw hitting inflation to the pitching side but I also wouldn't move all of the money in that direction. If your league generally spends $175/$85 on hitting/pitching, it is probably still going to skew in that direction. At some point, though, the spending will gravitate toward pitching and your league (using T.J.'s example), will probably spend something in the neighborhood of $170/$90 or $165/$95 on hitting/pitching. Rather than shift the full $200 to pitching then, T.J. would then shift $60-120 of his inflation dollars to pitching.

The higher the inflation, the greater the variability is going to be on inflation prices. Another way of looking at this is the greater the inflation, the greater the possibility that you're going to get some players who are $4-6 under value on your sheet using raw inflation. Another option for T.J. is to simply calculate the raw inflation and then use some kind of optimal bidding method to adjust. If Pujols is 15% below his raw inflation price, buy. If he isn't, let him go. There will be bargains later.

There is no easy answer to this question. One challenge with super high inflation rates is that there isn't a lot of real world Rotisserie data to analyze cause and effect. The approaches above can work, but depending upon T.J.'s league they also might not.