Alternatives to the FAAB process

This week’s ESPN Insider column, appearing every Friday.

The wanton waste in the free agent market continues unabated. This past weekend, in Tout Wars:

Avisail Garcia (pictured), $188.
Highest losing bid, $127. (I bid $45.)
Wasted: $61.

Robbie Grossman, $87.
Highest losing bid, $32.
Wasted: $55.

Lonnie Chisenhall, $37.
Highest losing bid, none.
Wasted: $36.

And on and on.

We have been saying that the key reason FAAB money management is so difficult is because nobody knows what anyone else is bidding. This is not a minor issue. It cuts to the core of how we, as humans, make decisions.

“Humans rarely choose things in absolute terms. We don’t have an internal value meter that tells us how much things are worth. Rather, we focus on the relative advantage of one thing over another, and estimate value accordingly.” — Dan Ariely, “Predictably Irrational”

We need context. We do not know whether a $45 filet mignon is fair value unless we also know that a McDonalds hamburger is $3. We do not know whether a $17,000 Ford Focus is properly priced unless we also know that a Ford Mustang costs $35,000. In a vacuum, how is it possible to know that we shouldn’t be paying $1,000 for that Mustang? Or $100,000? Or 50 cents?

FAAB bidding occurs in something close to that vacuum. Yes, we have to work within a budget and we do have a memory of past bidding history. But I didn’t know if a $45 FAAB bid for Garcia made any sense at all without some benchmark for context. That benchmark might have been the price I paid for Nori Aoki two weeks ago ($37), but given the influences of supply and demand on individual players, that type of context is highly imprecise. For me, it was off by $143.

That’s why we need to know how the other owners in our league value each free agent. We get that context in our draft auctions; why should we settle for a lesser system for acquisition of commodities that are no less important to our teams?

The good news is there are ways to provide this context – or at least simulate it – without radically changing the way we currently process FAAB bids.

One way is the Vickrey Method. William Vickrey, a Professor of Economics at Columbia University, proposed that the best system for auctioning off items of unknown value was to have all interested parties submit a closed bid, and then the item is sold at the price of the second highest bidder (or $1 more). Vickrey’s theory was that this method reveals the true value of the commodity. 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.

Using Vickrey, Garcia would have sold for $128, Grossman for $33 and Chisenhall for $1. Of course, even Vickrey would not have made my $45 bid a winner for Garcia. However, had we been using Vickrey, I might have been less skittish about going higher. The surprising reality is that, in those leagues that do use Vickrey, teams tend to spend more FAAB dollars.

There is an elegance to the concept, but it was defeated several times in constitutional votes by both LABR and Tout Wars, then accepted by Tout Wars for a decade before being shut down again in 2016. One of the reasons Tout changed its stance was because of instances like Chisenhall, where owners were not held accountable for gross overbids.

Another method is Double-bid FAAB.

One of the inherent difficulties in the current FAAB system is that we have so many options for setting a bid amount. I could bid $47, or $51, or $23, or $71 within a $100 budget; there are 100 nearly random shots in the dark. Deciding whether to go $37, or $38, or $39, is just a mind game, not a legitimate decision-making tactic. It’s 10 times worse in leagues that have a $1000 budget.

The first stage of Double-bid FAAB establishes pre-set dollar amounts for each player you bid on. In a $100 FAAB league, the only amounts you could bid on a player would be $1, $5, $10, $15, $20, $30 and $10 increments beyond that. All owners’ bids would set a preliminary market value for players at these tiers.

If there is a clear winner during this stage, the auction ends. Often there will be several owners tied with a bid in the uppermost tier. That is resolved in a second wave, where the tied teams submit another bid of equal or greater value than their first bid, in $1 increments. The winning team gets the player; if there is still a tie, then the player would go to the team lower in the standings.

The best part of this second-chance bid is that it gives teams an opportunity to see who they are bidding against, and adjust. If you are bidding against a team close to you in the standings, maybe you need to be more aggressive in that second bid. If you see that the other team(s) wouldn’t hurt you by acquiring that player, then maybe you resubmit the original bid and be content to potentially lose out on the player. If you’re ahead in the standings, it’s actually a way to opt out on that player completely, forcing another team to spend its FAAB.

The tactical implications provide for a better informed decision-making process. This two-stage system – typically conducted on successive nights – results in more accurate market values and gives owners more control over FAAB management.

However, the optimal method for free agent acquisition still would be to have a weekly auction , live or online. The ongoing issue is that it’s tough enough for most leagues to get all their owners together for draft day, let alone a weekly auction.

The challenge is logistics. How do you provide a venue where 12-15 owners can have access to active bidding without actually being online at the same time? The answer is exceedingly simple: eBay.

This technology has been in existence for many years and should be easy to implement. In practice, interested owners could initiate an auction for any eligible player. The owner would set a maximum bid, and the system would display the current high. If you set your maximum at $25 and the next highest bid is $15, the system would display that you are the high bidder at $16. Anyone who tried to outbid you would have to exceed your $25 max.

There is always the danger of deadline squatters, but nobody would ever spend more than $1 more than the next highest bid. It’s an automated Vickrey-style solution with far more visibility.

With this system, odds are Avisail Garcia would not have gone for $188, and perhaps not even $128. Owners would more likely submit lower bids early on, and then increase them as they got a better sense of the marketplace. Perhaps I would have seen bids edging up into the $50s and decided to stay in, rather than have one shot at $45 and be done.

In the end, the goal is to create a level playing field and provide a means for owners to better assess market value and better manage their FAAB resources. No system is perfect, but there are alternatives to our current FAAB method that are potentially better.