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Thread: The Winner's Curse and Why Trading Down is the Better Choice

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  1. #1
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    The Winner's Curse and Why Trading Down is the Better Choice

    Let's hope the Steelers can beat the odds:

    What Is the Winner's Curse?
    The winner's curse is a tendency for the winning bid in an auction to exceed the intrinsic value or true worth of an item. Because of incomplete information, emotions or any other number of subjective factors regarding the item being auctioned can influence bidders and give them a difficult time determining the item's true intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.

    ....a simple question: What is the likelihood that a player is better than the next player chosen at his position (e.g., linebacker) by some reasonable measure of performance, such as games started in his first five seasons? After all, this is the question teams face as they decide whether to trade up to acquire a specific player. The answer is 52%. Across all rounds, all positions, all years, the chance that a player proves to be better than the next-best alternative is only slightly better than a coin flip. This (overly) simple observation suggests a discrepancy between the teamsí perceived and actual ability to discriminate between prospective players....

    We also conducted an alternative version of this analysis by comparing the maximum (as opposed to the sum) of the two players acquired by trading down to the player taken with the original (higher) pick. This is an extremely conservative test of the value of trading down because, (1) the player costs almost 50% less than the original player and (2) it neglects the possibly high value of the second player. However,
    even setting aside those benefits, trading down is beneficial. Teams would have gained an average of 0.83 starts per season by trading down and keeping only the best of the two acquired players, with a 0.0 change in the number of pro bowls. In fact, this strategy is almost stochastically dominant; 48% of the time the best acquired player is better than the original player on either starts or pro bowls without being
    worse on the other (versus 40% of the time being worse on one without being better on the other). This means that even a team simply trying to fill a single spot on their roster would be better taking two draws later in the draft than one draw in the first round. This strategy is even more appealing when considering the reduced compensation cost, as well as the option value from the second player. It is difficult to overstate the strength of these results.
    The opportunity-cost analysis above indicates that teams make a mistake by holding onto a single first round draft pick rather than trading it for two lower picks.

  2. #2
    Legend

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  3. #3
    Hall of Famer

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    Thanks for the article. It's pretty interesting.

    I get that trading down is great because more lottery tickets gives better chances.

    The Steelers usually stand pat, which is what the article seems to be advocating.

    But, they are still saying it's basically a coin flip.

    I'm hoping our coin is weighted by trading up because (1) I'd imagine top 10 picks must have a significantly higher chance of impact than those at 20 and (2) wasn't the next ILB taken in something like round 3 (and Wilson who was often ranked 3rd went in the 5th)?

    I think the 2nd point probably points to the idea that the next best guy was significantly worse in this case.

  4. #4
    Pro Bowler

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    Not sure if this philosophy works when based on need.

    This theory works when building a roster from scratch but when you have a glaring need at one position it doesn’t matter how many more picks you get if you never plug the hole in the boat.

  5. #5
    Legend

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    Quote Originally Posted by Oh wow View Post
    Not sure if this philosophy works when based on need.

    This theory works when building a roster from scratch but when you have a glaring need at one position it doesn’t matter how many more picks you get if you never plug the hole in the boat.
    You still address need, you don't trade up to do it. The cost is too great. And think about this; where the Steelers typically have drafted late in Rd 1 actually works to their benefit, much better value than high round selections. There is a reason why NE rarely trades up, and frequently trades down in drafts. The value is higher. Having said all this, have to acknowledge the few times the Steelers have traded up have worked out pretty well.


  6. #6
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    Quote Originally Posted by Oh wow View Post
    Not sure if this philosophy works when based on need.

    This theory works when building a roster from scratch but when you have a glaring need at one position it doesn’t matter how many more picks you get if you never plug the hole in the boat.
    If only Slappy were still here. He argued vociferously that you never draft for need, but always just take the best player available.

  7. #7
    Pro Bowler

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    Quote Originally Posted by Buzz View Post
    If only Slappy were still here. He argued vociferously that you never draft for need, but always just take the best player available.
    That’s false. Never understood why folks think we aren’t flexible when it comes to BPA and need.

  8. #8
    Pro Bowler

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    Quote Originally Posted by Oh wow View Post
    That’s false. Never understood why folks think we aren’t flexible when it comes to BPA and need.
    Wrong. I said that the Steelers should -- and do -- take need into consideration when drafting. Slapstick insisted they always go, and should go, BPA. We went round and round on that, and he wouldn't budge. I don't think you were with him on that, although with few exceptions, you were like two peas in a pod. Only other time I remember you disagreeing with the Slapster was on the Bell situation.

  9. #9
    Legend

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    Quote Originally Posted by Buzz View Post
    Slapstick insisted they always go, and should go, BPA.
    sounds wonderful in theory, but it's not realistic.

  10. #10
    Pro Bowler

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    Quote Originally Posted by Buzz View Post
    Wrong. I said that the Steelers should -- and do -- take need into consideration when drafting. Slapstick insisted they always go, and should go, BPA. We went round and round on that, and he wouldn't budge. I don't think you were with him on that, although with few exceptions, you were like two peas in a pod. Only other time I remember you disagreeing with the Slapster was on the Bell situation.
    Slap and I disagreed on multiple things but one thing we agreed on was being positive Steeler fans.

    I guess it made us look like allies since we defended the team vs bashing them.

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