The Trade Value of Scarcity


All offseason, we’ve been discussing trade and surplus value of players in attempt to gauge how much of a return a team can expect from certain players in a deal. I often cite Beyond the Box Score’s World Famous Trade Value Calculator (no, they don’t pay me to say that) as a tool to determine the surplus value of a player. It’s an effective tool for objective trade or transaction analysis, and it’s based on a solid logical foundation. That basis is that teams would only give away additional assets (all of which hold some value) if they expect value in return for a player above and beyond what he is being paid for according to the free agent market rates. If a player was being paid at the market rate for his services, then theoretically teams would not pay an additional cost (in terms of prospects, money, other players etc.) when they could simply acquire him on the market for money.

Of course, this sort of system is excellent if everything were as freely available on the market as mentioned here. However, in pondering the Dan UgglaSan Francisco Giants issue that has been one of the hot button issues among Marlins fans this offseason, I thought more about scarcity and its effect on trade value.

My opinion

Yes, in a theoretical open market in which all players of all kinds are available at all times, such a system of trade evaluation would be perfect. Teams would always have alternatives for every spot they need to fill, and they would only have to trade when a player had a surplus value.

However, the free agent market is not saturated with all types of players. In fact, it is limited to whatever players remain to be signed, many of them on the lower tier of quality. Just because a team has the money and desire to acquire an 8 WAR first baseman, it does not mean the market can support that desire. You hear this all the time when free agency rolls around. It’s called scarcity.

Take the Uggla-SF example. The Marlins have a 3.5 WAR second baseman available. The Giants for a player of that caliber. Theoretically, the Giants should only trade something worth around $6M in surplus value to the Marlins for Uggla’s services. However, because the market for good second baseman is thin (or rather, because San Francisco wants a certain type of second baseman and as a result has limited their market artificially), they might actually consider giving us more than what Dan Uggla should fetch based on his contract/salary status.

The counter-argument

The counter to this is that theoretically, positional scarcity is made up for by the positional adjustment. I find this useful for evaluating players and particularly the value of their defense, but the adjustments are not great for evaluating the effects of moving individual players to different positions. Tom Tango, who used MGL’s UZR data to estimate the adjustments, said himself that the translations position to position aren’t always strong (particularly infield-to-outfield and vice versa, though he says that he is very confident in the within-infield and within-outfield impacts) and that the sample used to measure these differences was biased (only players who were deemed capable of making these moves were measured, thus implying a certain skillset that favored inter-positional moves). Not all players are likely to have the skills to hold up in moving around the diamond, so positional scarcity in the open market does have an impact.

Another argument against this is the fact that quality is not as scarce as it seems because there is little value in consolidating WAR. Sure, Albert Pujols and Skip Schumaker are worth it at around 9.5 WAR, but not so much different from having Mark Teixeira and Aaron Hill. However, there is a small value for consolidation, and it grows larger with the increase in the amount of slots it takes to fill a certain amount of WAR. After all, playing time is limited. At some point, this should either break even or overcome the decreased injury risk of spreading out WAR. Technically, this is supposed to be at the highest levels of team WAR, but it is something to keep in mind.

We can’t throw scarcity away

This was just a preliminary thought process on my part. It doesn’t get into the fact that teams are misvaluing players or that certain teams are going to have more information on their own players then others (thus, information is not perfect for all actors), but it does introduce the issue that scarcity cannot be just cast aside in favor of surplus value analysis. The Giants may be willing to pay a premium above the surplus value of Uggla for his services. It may be because he is being misvalued, but it could also have something to do with the fact that, right or wrong, the Giants have restricted their market to “good offensive players for second or third base,” and the supply of that market is not as great as the overall 2B/3B market. The Marlins could end up with the advantage because of scarcity.