FANALYTICS: Negotiating change

By Ron Shandler

This article was originally published on August 10, 2001.

This fantasy baseball season has been faced with more constitutional crises than any I can remember.

Some of the issues were specific to the experts leagues - and I've written about them before - but still had some global relevance. Other issues, like the ongoing Jermaine Dye controversy, have affected many leagues directly.

My response to the Dye fiasco last week was not taken well. To be honest, I was responding to the rule in and of itself, not the issue of dealing with the situation as it stood. I do believe in following the letter of the law of the constitution, which would require you to handle Dye however it is written.

The problem was the grey area of how the transaction was reported. Was it a 3-way? Was it two single deals? Sources conflict, and we have not been made privy to the truth. So, since we cannot read the minds of the dealers, the best approach would be to consider the results of the trade and deal with the aftermath. In the aftermath, Jermaine Dye never left the American League.

But to my mind, more important than handling the short-term crisis is looking at the long-term implications. This is clearly a rule that needs to be changed. But for many leagues, that change will be as difficult to achieve as getting a bill through Congress.

Let's turn to another rules issue and see the gears of progress at work in a league that historically has not been quick to change... LABR.

John Hunt is the de facto commissioner of LABR, as well as an owner in both leagues, a dual role that occasionally poses a conflict of interest. But when John makes an unpopular ruling, it is usually not because of that conflict. John also wears a third hat, that of the proxy voice of Baseball Weekly management, which owns LABR, more or less. LABR often resists change for fear of any possible sales impact on BW's most-read issue of the year, it's mid-March fantasy special. Don't mess with success. Don't fix what ain't broke.

I prefer the cliche, "to stand still is to move backwards."

But LABR can change. It has in the past, though not with a flourish but with a grunt and a snort. The process involves some orchestration. It involves negotiation. Best to show you how this particular situation played out by just letting you read excerpts of the email discussion that transpired this past week. I supply some additional commentary in italics...

ROGER ANDERSON, Being an especially busy FAAB season, I thought I would run something by everyone concerning bidding strategy. There was a dude named William Vickrey who studied game theory. In 1961, he proposed that the best system for auctioning off items of unknown value was to have all interested parties submit a closed bid, much like FAAB in that the item is awarded to the highest bidder, except that it is sold at the price of the second highest bidder (or $1 more).

Vickrey's theory was that it reveals the true value of the commodity (and some stuff about how it is good for society.) Since there is no real known value for a player, sometimes an owner will bid $64 for Andres Galarraga while the second highest bidder only offers $16 (which is what Fantasy Baseball magazine's Greg Ambrosius actually did). If we were all together for a live auction, the highest bidder would have said $17 and he would have been sold. (Unless, of course, the $16 bidder would really have paid $18.) It also cuts a live FAAB auction right to the chase, something I noticed the Tout Wars did this year.

The simple idea may not seem so brilliant, but Vickrey was awarded the Nobel Prize for Economics (and $1.2 Million) in 1996 for his work. He was so excited, he died of a heart attack a few days after receiving the prize.

I don't think you have to be a game theory guy to appreciate the beauty of the Vickrey auction concept for FAAB, but the reaction I usually get is, "who cares if someone pays too much?" I just got my income tax refund, I care. Curious what you guys thought.

We've talked a lot recently about the in-season closed FAAB bidding system, a method born out of the Pre-Internet Period in our history. There is really little reason these days to use this system, but for some, old habits die hard. I've been a proponent of open bidding, but this Vickrey method offers an interesting alternative.

Several other LABRites wrote to support Roger's idea, or to express interest in examining the issue further. John Hunt, however, would not likely embrace this change. And in fact, his response was not unexpected...

JOHN HUNT, Baseball Weekly: If I bid $64 on a $16 player, shouldn't I be penalized for so grossly misjudging the other owners' bidding? Seems like I'm taken off the hook by getting him at $17. I don't think there is such a thing as true value when you're talking about FAAB bids, since everybody has a different amount in the bank at a given time...

John was essentially cutting this down. The bandwagon started to accumulate jumpers as well...

JONATHAN MAYO, I think I have to agree with John on this one. While I can appreciate the efficiency of Vickrey's concept, especially in the real world, I think some of the strategy of FAAB bidding would be lost. Especially this time of year, with players switching leagues, deciding to blow all of your FAAB is a decision you have to make.

If you bid $80 on a player, and the next highest owner only bids $5, is it because the first owner grossly misjudged the value of the player, or is it because that particular player would truly only help the first owner's team? Or a combination of the two? Sometimes you have to overpay to get a category you need down the stretch, just like you might make a seemingly unbalanced trade to get that one category.

Left alone, this issue would die quietly. But I saw this as an opportunity to make an attempt at change. Further supporting the Vickrey method would fall on deaf ears at this point. But there was a way to negotiate the issue back into active status. The first step was to redirect it, albeit subtlely...

SHANDLER: Both sides of this argument have merit (and I have to tell you, if I was Greg A. right now, I'd be one VERY unhappy camper, whether I misjudged the demand for Galarraga or not). But these are not the only alternatives.

Check out Tout Wars' live online FAAB auction from Tuesday night at This was very easy to orchestrate. Perhaps this is not something that we'd want to do every week, but for the high value players, it certainly offers an alternative to "mis-judging" by a mere $48.

ANDERSON: Actually, your FAAB Bonanza was what got me thinking about this. The point it seems is to not have to overbid, since you know what the current asking price is. Wouldn't the Vickrey auction do the same thing, except take 5 hours less and eliminate owners getting shut out by the deadline and/or any problems with refresh rates? Since you already know how much you would pay if you HAD to, doesn't a Vickrey simulate the FAAB Bonanza?

Anderson was correct, but we needed to take the focus away from Vickrey. I pressed onward with my idea.

SHANDLER: The only thing I don't like about the Vickrey auction is that you can - albeit with a tad of risk - overbid all the time knowing that you'll get the player you want at just $1 over the 2nd highest bid. The only risk is if two people attempt to do this on the same player. But if I estimate that a player is going to go at about $25, there is little risk for me to bid $75 to ensure I get him at $26, or whatever the next highest bid is. I've often been tempted to place a FAAB bid with the SWAT and tell him to give me Player X for $1 more than anyone is willing to pay, whatever that is. Vickrey simulates that, I suppose, but it doesn't address the real issue.

My beef with this whole process is that the goal of these leagues is to show who can best place value on players - draft value (projected performance) or FAAB value (supply and demand) - and a blind auction completely negates that. We've been doing it this way for so long that nobody has ever questioned it; why can we have an open auction for the draft but not during the season? The original reason was logistics, but the internet has eliminated that obstacle. With message boards, chat rooms and eBay-style venues, there's no reason why we have to fly blind. Vickrey is a potential step in the right direction, but why settle for going halfway when we have the means to do it right?

Diverting attention away from Vickrey was my sole purpose here, even if it looked like I was tring to sell open bidding. Well, selling open bidding would not have been a bad thing, but I knew the odds of Hunt going for that were far less than him considering something else. That was the goal... get everyone so worked up about open bidding that Hunt would settle for at least considering Vickrey.

JOSH PALEY, 2000 CDM Diamond Challenge Winner: As for which auction method is preferable, I suspect that if people used Vickrey, they would become accustomed to it in the FAAB context, and the anecdotes would be interesting.

Personally, I like the concept. I don't know if I would prefer it, but I think it merits trying, even if LABR isn't the desired setting.

As for open auctions, one downside is that you miss out on "stealth bids" where you hope to sneak a player under everyone else's radar. The other issue is logistics. And while the Tout Wars auction may have worked well, expecting it to work well every week may be a problem as people take vacations, have families, need to work, etc. It is one thing to leave bids with a Commish. It is quite another to have to be present at Time X to participate in an auction.

ANDERSON: I agree with most of that. But I have to ask... Overbidding all the time is just a tad of risk? Bring your poker chips and come over to my house. That's the equivalent of bluffing every hand.

So one advantage to an option auction over Vickrey is that you know who you are bidding against. Or do you? If all the owners wanted, they could wait until the last minute to make their truthful bid. It doesn't really require an hour then, it just requires an instant with Vickrey, and stealth is maintained.

And I think it quickly becomes clear with practice, that overbidding every time is not a viable strategy. It is still in an individual's best interest to submit a truthful bid. I'm thinking there could be something to that Nobel Prize.

SHANDLER: This issue of "stealth bids" is interesting. One of the Touts objected to the open auction for his loss of that tactic. Personally, I think there are VERY few players that slip under the radar in these high-caliber leagues. If you miss out on one, it's your own fault. But to count on this as an advantage also flies in the face of what these leagues are all about.

As for the timing issue, this is the real crux of the problem with open auctions. However, there are ways around it. You could post a preemptive bid. You could have a proxy bidder. You could provide your SWAT or Commish with bidding instructions. It's not an insurmountable problem. Look, everyone now agrees to a regular trannie deadline and most of us take one last look at the MLB transaction wire before we place our bids. In an open auction, rather than just emailing those blind bids to the SWAT, we'd get onto the bid board and place the bids.

I like the strategic implications of this as well... Let's say you were planning to bid $70 on Fred McGriff. You head over the bid board and see that the current bid is $75... but that owner is one who could pass you in the standings if he acquired a power hitter. Now you have to decide whether you go $76 just to prevent this guy from getting McGriff. It adds a whole new dynamic.

KEITH LAW, Baseball Prospectus: (An open auction is) way too time consuming. It's not practical for those of us who make our livings outside of the baseball universe.

Responding to an earlier point, prices paid don't necessarily drop in a sealed second-bid auction; if prices were universally lower in a SSB than in a sealed bid, why would sellers ever hold them? The point is that the prices are more *rational*.

In the live March auction, we use an English auction (start at $0, last man bidding gets the player), not a Dutch (start at some high #, like $100, reduce by $1 until someone says "yes"). The single-bid analogue to an English auction is a sealed second-bid auction: In both, the winner pays just $1 more than the second-highest bid. The single-bid analogue to a Dutch auction is a sealed-bid auction, where the winner pays what he bid. In other words, using an English auction in March and a sealed-bid auction for FAAB is inconsistent.

Remember that the goal here is to enact some change. As long as people were still talking about Vickrey - an issue that Hunt had already cast off - we would not make any headway. Vickrey had to be the compromise. I had to continue the discussion about open bidding, even if that meant generating negative attention towards it. In fact, negative attention would be a good thing right now...

SHANDLER: There is a way to do an open FAAB auction on a regular basis, that in theory, could require as little as one person at the bidding board at the deadline hour in any given week...

1. The bidding board is open all week. Owners can place their FAAB bids whenever they want to.

2. Those owners that wish (or are unable to be at the bidding board at deadline) can send their league's SWAT a maximum bid on the players they want. This is essentially how we do it now, except that you would not be required to send in a max bid if you think you'll be at the board at deadline.

3. A half hour prior to deadline (or whatever time we'd set), the SWAT would update all the board's current high bids by $1 based on the max bids they've received. So if Fred McGriff is currently at $45 and they received a max of $70 from someone, they'd place a $46 proxy bid for that person.

4. While this is going on, any owners that wish to continue to up the bids may do so. The SWAT would actually be on the only person who would HAVE TO be on the board up until the deadline, making the proxy bids for absentee owners.

5. If the SWAT receives max bids from more than one owner on a particular player, I suppose the high bidder would get the proxy services of the SWAT.

6. If an absentee owner decides to visit the board at deadline, he can post bids that exceed the max sent to the SWAT. But the SWAT is, needless to say, limited by the max bid amounts he received.

High bid at deadline wins.

Advantages: Bidding becomes more interactive. Owners are given the opportunity to place bids based on prevailing market conditions, not blind guessing at what others might do. Overbidding is minimized. And most important - you don't have to be at the bid board at any specific time.

Disadvantages: Someone is going to have to have the guts to make the change. Or, we could just do nothing. Clinging to the status quo, taking the path of least resistance, is just wimping out. Be bold. Be ground-breakers. At least test it for a year and if you don't like it, go back to the old way.

LAW: The problem with the system you've outlined is that it's too complex. Joe Average Fantasy Player does not have the time or patience for this. Even FAAB is too complicated for many leagues.

Finally! Just the piece of negative attention necessary. But through all this, we had not heard from John Hunt. Finally...

HUNT: I'm opposed to anything that would require any increased demands on time at the trannie deadline. I, for one, make my moves on Sunday, and you can't ask even the most diligent SWAT to be online at the same time every week of the season. So, no, I can safely say the LABR leagues will not be the gutty ground-breakers for an open FAAB auction.

Another idea shot down, but nothing unexpected here. However, the seeds were now in place to orchestrate the final negotiating effort. That ploy was to pull back on open bidding and re-introduce Vickrey.

SHANDLER: John... Is that your "final" answer?

Why bang the gavel on this? Why don't you let the people decide? In Tout Wars, they vote on just about everything. Sometimes proposals die and sometimes we vote to test a new idea for a year, but if nothing else, at least they know where opinion lies.

LABR can change. Though it took years of arm-twisting, we did finally relent to allowing owners to keep league-crossers, even though it may not be the way most leagues play. But it was best for us, and an example that perhaps needed to be set.

At minimum, give us the opportunity to vote. You might be surprised at the result. Or not. But at least we'd know. And I suppose you could always overrule.

Does LABR prefer... 
[   ] Some type of open auction system. 
[   ] The Vickrey method (2nd highest bid plus $1) 
[   ] Keep things the way they are 
[   ] Willing to go along with the majority

Let us vote, John, at least so someone can finally put a sock in my mouth.

Or not.

The door was open. Would he take a step inside?

HUNT: Well, Ron, I'm telling you right now the open FAAB auction will not work, but I'd be willing to put the Vickrey thing up to a vote in March.

A baby step, and one that still might fail. But now we've got nine months to build a pro-Vickrey lobby.

Hmmm... maybe this is like getting a bill through Congress...