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Post Info TOPIC: C Auction Discussion on Puffing (Again)
Josh

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C Auction Discussion on Puffing (Again)
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We have tinkered with and considered proposals for C auction reform over the past few years, but the problem of the essential unfairness presented by two teams owned by a single owner persists.

Consider this scenario:

Owner A owns two teams.  Owner B owns one team.  Owner A and Owner B are the last two bidders for a good player that is owned by Owner A's other team.  Owner A and Owner B do not have the same incentives.  As the bids go up, Owner B just pays more money for the player, which is bad for Owner B.  But Owner A, while paying more money for the bidding team (which is bad for that team), also gains a benefit for his second team from the higher bids. 

At best, the presence of different incentives for Owner A and Owner B distorts the market and results in a price higher than would occur between two completely disinterested owners.  At worst, Owner A may act with an improper motive or intentionally engage in "puffing" to drive up the bid -- a recognized fraudulent bidding practice. 

This is not hypothetical.  THIS HAPPENED CLEARLY IN THE LAST C AUCTION.  The screen capture of the questionable bidding is here: https://drive.google.com/file/d/1tmAPm0UBQcTYh1ZOfPK9ozvsXrMFN_0L/view?usp=sharing

I suppose we could tweak the incentives, but we have tried that and many solutions make the job of YOC in running the auction very complicated. 

At this point, the only solution I see that assures fairness is a complete ban on bidding on players owned by the same owner.  I know others have supported this in the past, too.  The fundamental reason for this is the same reason we don't allow trades between teams owned by a single owner.

I am raising this early to get some discussion going.  Maybe I am interpreting what happened in prior auctions incorrectly.  I am a big free markets guy which is why I find the incentives analysis compelling, but maybe my economics analysis of the incentives structure is wrong.  Or maybe I just have an over-developed sense of fairness. 

It is very likely smarter folks have better ideas and solutions, or could make me see why this is not the problem I think it is.

But lets have a full and honest discussion.



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Note: Josh, I cannot see what your example was from last year, but I will add what I did last year when I tried to propose a similar ban or restriction last year as I am in support of your idea.

Before two years ago, ARBA had a "sheriff" that was able to police the C auction independently and step in if they wanted to take a high value player away from a two-team owner.  That sheriff was Mudville. While they did not step in two years ago, Mudville had the budget to easily knock anyone out of the bidding on a certain player any time with little impact to Mudville's bottom line.  However, last year, Rishi was owned by the same owner as Mudville.

Mudville warned that this poses a perhaps a currently-unforeseen problem to the league as Mudville is the richest team by far.  By acquiring Rishi, the owner of Mudville could sometimes act contrary to logical behavior to aid Rishi (not saying they would).  They gave the example of Rishi having 3 full-time SS players and if one was eligible for the C auction (which none were), Mudville could simply out bid everyone without any real competition.  Mudville could act similar to how the Yankees and other rich teams in MLB act and grossly overbid for the player as well.  This would allow excess funds to essentially pass from Mudville to Rishi and all the actions are currently legal within the rules as written.  Overall, Mudville would sustain likely no impact to their inter-season savings account and Rishi would see a boost in theirs.

Last year, Mudville and Rishi did try to work as a team in the auctions, often with Rishi trying to get good players relatively cheap and if they failed (if the player was good enough) Mudville would snatch them away instead.  Rishi did sell Mudville Hunter Renfroe, though I don't believe Mudville tried to overpay as he went for only $270K.  Though the main reason for dropping Rishi was due to work, a secondary reason was to allow Rishi a better chance to be competitive as it was hard for me to justify putting good players on Rishi when Mudville could easily take them instead.

Last year, I proposed the option to set bounds as a way for the league to do the following:

  • Prevent a team from intentionally overbidding to help another team owned by the same owner (through a low upper bound).
  • Prevent a team from bidding on minor-impact players to help another team owned by the same owner (through a high lower bound).

I would support the complete ban of bidding on players of teams owned by the same owner.  I do think we should restrict this somehow and not rely on a team like Mudville to "police" 2-owner teams during the auction.  I am flexible with the value of the bounds if that proposal is pursued, but I would want it to be a fairly narrow range and have a high hurdle to clear for the lower bound.

Regardless of how we do it, I think we do need to do something about it.



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Travis

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So my Harmony Grove team will need a 3rd baseman next year as Diaz doesnt qualify anymore.  My Camden team is putting Arenado and Machado on C as they come off A5 contracts.  Doesnt really make sense, or seem fair, that my Harmony Grove team is restricted from two of the better defensive 3rd basemen in the game just because they are too expensive, no longer A players, and my Camden team is rebuilding.

 

I thought the new(er) rule that two team managers couldnt make the first bid on either teams players was put in place to fix the low end concern.



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Josh

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Link is fixed.



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Josh

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Travis -- Great point.  I guess the best answer is why does the league already have a rule stating, "Trades may not be made, directly or indirectly, between teams owned by the same manager"?

This rule is in place even though it is potentially "unfair" to the two teams because of the potential for abuse and the appearance of creating an unfair advantage (even if any particular trade would be completely fair).



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Travis

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My answer would be in the c auction you have open live bidding where all teams are taking part for everyone to see.  With a trade you dont always have transparent detail into the trade and every team involved.  From experience, I have missed out on several players I would have wanted and made offers on, it wasnt announced on the message board they were available and I just didnt think to ask about them.



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Josh

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Travis et al -- in "theory" the live auction would be a transparent market. 

The problem is that an ideal market assumes that all buyers have equal incentives.  If everyone had one team, then the costs is the same for all participants.  In this case, owners with two teams have a lower cost for each bid because they also benefit from the sale of the player.

Or...  consider if the Owner is not trying to compete with both teams.  The second team can be used to pump up bids by creating  a false sense of competition to manipulate the price up; for no other reason. Basically, the live auction does not reflect the rue market value; the player goes for more than the fair market value price of the item. 

This becomes pretty obvious when the bidding is almost closed and a sham bidder swoops in to make a single bid -- driving the price up a bit with a high degree of confidence that a buyer who just outlasted the serious bidders will go higher at least once more.  This is a common scam -- illegal under federal and most state law -- and is why, for example, on Ebay you are not allowed to bid directly or indirectly in your own auctions.  Here is an article about a lawyer who was disbarred for the practice, for example.

In looking for a compromise designed to help align incentives and still permit free movement of players: would you support a proposal that would allow bids on players owned by the same owner, but add a $40 "transaction fee" if a team unsuccessfully bids on a player from a team owned by the same owner?



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Travis

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I understand what youre saying, and maybe Im just naive, but I just dont think it happens in ARBA.  Having said that, if everyone thinks its a true problem then I would be agreeable to your losing bid transaction fee idea.



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My personal feeling is that a full ban would be appropriate.  If for no other reason than stopping the (reasonable) concern about and at least appearance of conflicts of interest.

I would also support the "transaction fee" concept.



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Kevin Dahm

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I would take exception to the notion that when you jump into an auction at the point where bidding appears to be petering out, you have a "high degree of confidence" that the person you're outbidding will bid at least one more time.  In the example you posted the high bid was 480K and then Phillip jumped in and bid 500K, which put the future contract into a different bracket.  The cost of bidding 520 instead of 480 isn't just 40K in this year's dollars (and even the 40K might have been a deal breaker).  The team that had bid 480 did indeed go higher, but objectively Phillip wouldn't have known that, and shouldn't have bid 500 unless he thought the player was worth 500K to the team that was bidding.  

If a team is simply not allowed to bid on ~5% of the players while other teams are allowed to bid on all of them, that's indisputably a disadvantage.  

I do not agree a two team owner has any advantage in the C auction over a one team owner.  I agree that the ability to bid 150K on a player owned by your other team, thus keeping him at a total cost of only 75K, was an advantage, but we already fixed that scenario.  I also agree that a team *would* have an advantage if its owner had two teams but primarily cared about one of them. But since I know I don't do that and I'm not convinced anyone else does that, I wouldn't support any proposal that puts two team owners at what is indisputably a disadvantage compared to one team owners. 

 

  



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I think part of what Josh is trying to get at is exactly true.  Two team owners will, regardless of whether they try to or not, operate with more knowledge than everyone else on their player's auction.  They will know the price at which they would let the player go, but also whether they planned to go after another player from the other team they own later on, which would effectively lower the bid being made.  The way the rule is currently stated, a two-team owner can't bid on a player until someone makes a bid, which would raise the price at least $40K if their second team does not take the player.

I also think Travis is right in that ARBA really hasn't seen anything egregious either.  I believe in the example, EGR opened the bidding to $480K (hence Tom's "preemptive" remark), no one else placed a bid (despite Mudville's encouragement attempt, similar to what many of us do during some point of the auction), Rishi had budgeted up to $500K for Castellanos (who was the first player in the auction), and I believe Rishi placed a single bid at $500K.  (My final comment in Josh's example was sarcastic, but certainly meant to call attention to this rule that I had tried to push to be revised last year, since I foresaw the controversy the rule creates and would be highlighted by two cash-rich teams with a single owner.  I certainly did not intend to "rig" the system, especially given the stakes was just an extra $20K in profits to Mudville, less than 0.1% of their cash on hand at that time.)  Rishi hoped to win Castellanos (they needed an OF, especially given Renfroe was in the C auction and would likely leave the team, and Castellanos was decent first player in the auction), but given that Castellanos was the first player in the auction, they needed to rigidly stick to their budget, too.  Therefore, if EGR out bid them, they would let him go (which is what happened).  Rishi's bid was within the rules at the time, but it is important to note Rishi did not force EGR into a bidding war.

If we want to discuss the spirit of the rule, let me ask the following question: if Rishi and EGR did get into a bidding war with both making multiple bids for Castellanos and eventually Rishi bowed out, but EGR ended up paying $600K or $700K for him, would that be any different?  (Rishi certainly could have bid much higher with the knowledge that Mudville was going to try to bid on Renfroe later on to replace Castellanos.)  I would think that situation is much more the situation Josh's eBay example is trying to get at.  It is also much more the situation we would want to avoid.  While I don't believe the situation has ever really happened, I believe there are a few rule change options to preemptively combat this possible situation:

  1. Force the second-team to win the auction.
  2. Make the second-team give their best-and-final bid as their first bid.  If we want, we can have them denote it with an asterisk in the bid (ex. $500K*) so that everyone knows its a best-and-final.
  3. Add a transaction fee.
  4. Ban the second-team from making any bids on the owner's first-team's auctions.

In my opinion, #1 would effectively destroy a second-team's budget.  Mudville (who could easily bid anyone's remaining budget) would be much too happy to run someone to bankruptcy in this scenario as they would just bid $20K below the team's remaining amount forcing them to pay out all they had, since Mudville knows the second-team must win the auction.  Obviously, this not a good choice and I would not support such an option (I merely put it in this discussion to explore all options).

#2 is an interesting option if we wanted to still allow owners with two-teams to bid on their auctions.  In fact, #2 would allow second-teams to make opening bids on players as everyone would know they could top that bid and the player is theirs (assuming the rest of the league does not try for the player as well).  I believe Option #2 was what happened in the example with EGR and Rishi.  Certainly someone can still move assets around between teams if the league doesn't choose to beat their price, but about half of the transaction's money would be lost in the process.  I am fine with this option.

Option #3 needs to be developed more.  Would the fee be attached to all non-winning bids of the second-team or is it just one fee per auction player?  Should both the first-team and second-team of the owner be fined?  Who gets the fee?  Does it get lost to the dark depths of ARBA, the winning team, or the selling team?  How much should the fee cost?  I personally think it should be a fee attached to all non-winning bids of the second-team not just once per player.  Additionally, I think the fee needs to be higher than the amount of two standard bid increases ($40K).  I would push for something more in the $60-80K range.  I also think the fee should be lost to dark depths of ARBA.  I do believe both of the owner's teams should be fined as well, if not, one team gets hurt while the other team gets rewarded.  I would consider this option, but it needs more definition from the group first.

Option #4, similar to Option #2, is a clean and easy way to deal with this scenario.  Banning any bidding between same owner teams would be simple on Tom and Eric as they run the auction, but I also think ARBA has owners that will not try to sneak around Option #2.  Overall, I am fine with Option #4 as well.

After writing this, I think Option #2 is actually my favorite.  Let the second-teams make a best-and-final offer and if someone else wants the player more, let them outbid them.  I would be fine (and might even prefer) them to make an opening bid on a player though I would like to see it written in a way that allows them to not have to make the first offer either.



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One quick clarifying thing - whatever rule(s) come out of this discussion, they would not be implemented until the *next* offseason, particularly if it is in the form of an outright ban.  If the only adjustment is something small like the $40k if a 2-team owner bids on one of his other team's guys but then doesn't get him, I may be talked into letting that take place right away.  But since the voting won't take place until January and the offseason is already under way, if there is any kind of truly meaningful proposal I would need to give everyone a season to prepare.

Also, thanks to everyone participating in this discussion!



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Rick

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I don't believe it fair to deny two-team owners from bidding on their second-team FA's.  If we really believe there is a problem with those owners bidding up their second-team FA's to increase the money they get in return, then decrease the money they get in return for losing that FA.  For example, the two-team owner gets the standard return on losing any player with a winning bid under 300.  For any player with a winning bid over 300, they get a set amount in return regardless of the amount of the winning bid.

This could also motivate the two-team owner to trade those players before rosters are due, thereby slightly reducing the number of FA's in the pool.

 



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Mike- Rome

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I generally feel like the ideal circumstance is that no one is allowed to own more than one team... BUT... that's too much of a change and too much to ask. 

As such, I'm pretty indifferent. I know we've had teams act as a "police officer" by bidding up players who are going undervalue, but with limited roster slots, that's not super effective. 

Seems to me this is much ado about nothing (and I'd argue in favor of no change), but would support the transaction fee if it makes people happier. 

Now will one of you fellas trade me a freaking shortstop?



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