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A thought experiment on the value of UFAs

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Old
01-17-2009, 04:58 PM
  #1
Goldthorpe
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A thought experiment on the value of UFAs

Lets assume for a moment that the UFA market is completely fair. This means that:

a) A given UFAs, all other things being equal, is interested in signing with any team.
b) This UFA will always sign for the best contract offered.

Suppose one team happens to sign a UFA under these assumption. The team offered the biggest contract around, and the UFA accepted. Then, later in the season, this team decided it made a mistake and try to trade the UFA to another team. Assume the player is producing exactly how he is supposed to be producing. What is the player trading value?

Answer: close to 0, wheter he's a good player or not.

Why? Because the 29 other teams had their chance to sign him. But they ended up offering a smaller contract. This means they don't believe the player is worth his contract. This means, from their point of view, he is overpaid. Why such a player would have any trading value at all?

Obvious, this thought experiment has many issues that explain why, in real life, players who signed big UFAs contracts still have trading value. Namely:

1) Some teams are more interesting than other, for reason of past performances, geography, weather, etc. A team without such benefit would have to compensate elsewhere in order to acquire expensive UFAs, by trading for one for example.

2) Some teams benefit from "hometown discount" from players they developed (ex: Markov in Montreal). Again, since these players are paid less than what they would fetch on the open market, they acquire trading value for a team who may be interested in them.

3) Some players perform much better than predicted. Thus, they become underpaid from the point of view of teams who bid on their service. Thus their trading value rise.

Where I'm going with all this?

That's an excellent question. I guess my main point is: it is the norm for players who signed UFAs contract to be worth close to nothing market wise. That's why when stars signed with big paycheck are traded, they generally don't bring much. And when they do, it's because the team that signed them enjoyed one or more of the benefit mentioned above.

Am I making any sense? Flame away.

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01-17-2009, 06:35 PM
  #2
overlords
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Not terrible logic, but this only applies to FA's who only sign the biggest contracts offered. What about players like briere or hossa?

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01-18-2009, 11:33 AM
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Your basic premise is faulty - if every team had an equal opportunity to sign free agents then the Habs wouldn't have to beg and overpay for the ones they have signed over the past few years. A significant issue is taxation - Some US markets allow the players to take home 15-25% more in take home pay than in Montreal.

And then there is the media pressure, language issues ............

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01-18-2009, 11:39 AM
  #4
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Quote:
Originally Posted by Bodacious View Post
Your basic premise is faulty - if every team had an equal opportunity to sign free agents then the Habs wouldn't have to beg and overpay for the ones they have signed over the past few years. A significant issue is taxation - Some US markets allow the players to take home 15-25% more in take home pay than in Montreal.

And then there is the media pressure, language issues ............
Of course the basic premise is faulty. That's why I begin with "Lets assume for a moment that the UFA market is completely fair". That's an assumption. Obviously it won't always hold true, the same way that "market agents are rational" in capitalism is an assumption that doesn't always hold true.

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01-18-2009, 12:01 PM
  #5
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Another reason they have trading value is that while overpaid, they might be less overpaid than some other players they could be traded for. Like that Samsonov for Cullimore and Salmelainen trade.

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01-18-2009, 01:57 PM
  #6
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You have isolated an important factor for sake of argument. Great post. Vinnie's value would be limited to some extent by the size of the contract.
Quote:
Originally Posted by Goldthorpe View Post
Lets assume for a moment that the UFA market is completely fair. This means that:

a) A given UFAs, all other things being equal, is interested in signing with any team.
b) This UFA will always sign for the best contract offered.

Suppose one team happens to sign a UFA under these assumption. The team offered the biggest contract around, and the UFA accepted. Then, later in the season, this team decided it made a mistake and try to trade the UFA to another team. Assume the player is producing exactly how he is supposed to be producing. What is the player trading value?

Answer: close to 0, wheter he's a good player or not.

Why? Because the 29 other teams had their chance to sign him. But they ended up offering a smaller contract. This means they don't believe the player is worth his contract. This means, from their point of view, he is overpaid. Why such a player would have any trading value at all?

Obvious, this thought experiment has many issues that explain why, in real life, players who signed big UFAs contracts still have trading value. Namely:

1) Some teams are more interesting than other, for reason of past performances, geography, weather, etc. A team without such benefit would have to compensate elsewhere in order to acquire expensive UFAs, by trading for one for example.

2) Some teams benefit from "hometown discount" from players they developed (ex: Markov in Montreal). Again, since these players are paid less than what they would fetch on the open market, they acquire trading value for a team who may be interested in them.

3) Some players perform much better than predicted. Thus, they become underpaid from the point of view of teams who bid on their service. Thus their trading value rise.

Where I'm going with all this?

That's an excellent question. I guess my main point is: it is the norm for players who signed UFAs contract to be worth close to nothing market wise. That's why when stars signed with big paycheck are traded, they generally don't bring much. And when they do, it's because the team that signed them enjoyed one or more of the benefit mentioned above.

Am I making any sense? Flame away.

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Old
01-18-2009, 02:03 PM
  #7
loudi94
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Quote:
Originally Posted by pam19 View Post
This assumes that the needs of the teams are static.

If you were OK on Defense but you lost two till the end of the season then your needs change...

Only constant: change.
+1
The market always changes.

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Old
01-18-2009, 02:18 PM
  #8
Kriss E
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You start with ''Let's assume'', so right from the start you admit it's not representative of the reality.

Also, what you say about the UFA not having any trade value because he signed the best contract before and all the other GMs think he's overpaid so wouldn't want him, makes very little sense especially when you say he's performing as should be.

You also forgot to mention that many GMs can offer the same type of contract. At the end of the day, the player will go play wherever he wants, but that doesn't mean he didn't receive similar or identical deals elsewhere.

There's 2 things that influence the value of a player. His production/performance and the market.
The rest is pretty irrelevant.

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