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To Whom Should the Red Sox Make a Qualifying Offer?
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Post by jmei on Jul 22, 2013 10:31:30 GMT -5
The factors involved should be. #1 The marginal value of the expected draft pick (or the value of the player you expect to draft - the expected bonus) #2 The probability of the player accepting the QO. #3 The amount of salary you expect to eat if the player does accept. For instance let's say you the draft pick has a marginal value of $2M, and you think that there is an 80% chance that the player will accept the QO and you will have to trade him and eat say half of the contract $7M. In this case, your expected cost is $5.6M (or $7M * 80%) and your expected return is only $.4M ($2M * (1-80%)). There is no way that you would offer the player in this case a QO since $5.6>$.4M. Additionally there is always the risk that the player may get hurt during the off-season and be untradeable. For these reasons, I don't think you will see large market teams aggressively employ the strategy that you outlined above. In many cases, it's not rational to do so, because the expected profit is less than zero. You're right that this is the type of analysis we should be using, but I quibble with the numbers you've used. One analysis has the value of a draft pick in that range as being worth between $3.6m and $7.4m. Let's split the difference and call it $5.5m, factoring in the added flexibility that having a larger draft pool gives the FO in terms of taking overslot guys later in the draft. I also think the Red Sox will only have to eat $4m to trade any of Drew/Saltalamacchia/Napoli, assuming they keep up their YTD performances and stay healthy through the remainder of the season. I also think they'll get back a minor prospect-- let's call his worth $0.5m. We can then do a little math to figure out how at what point it would be worth offering each player the QO in terms of how likely they'd be to accept the QO. ($4m * X) = (($5.5m + $0.5M) * (1 - X)) X = 60% So under my assumptions, if you think there is a 60%+ chance that a player accepts the QO, it does not make financial sense to offer one. If you think there is a less than 60% chance a player accepts the QO, then it does not make financial sense to offer one. EDIT: I ignored the risk that a player might get hurt during the offseason because I think it's negligible. I guess Napoli's hip could give out during the offseason or something, but players generally stay pretty healthy when they're not playing.
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Post by johnsilver52 on Jul 22, 2013 10:44:14 GMT -5
"but players generally stay pretty healthy when they're not playing."
JMEI,
Does Napoli:
A) Like Skiing? (Jimmy Lonborg)
B) A Bar Hopper? (Mark Fidrych)
C) Play Football under some other name maybe? (Bo Jackson)
Just kidding of course.. Just a few guys who had disastrous off field injuries that ruined careers.
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Post by mainesox on Jul 22, 2013 11:02:29 GMT -5
Okay, so, I'm not implying that I think they should, but could the Red Sox, in theory, decline Lester's option and offer him a qualifying offer? Would they get more by picking up his option and trading him? Would he decline a qualifying offer?
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jimoh
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Post by jimoh on Jul 22, 2013 11:47:45 GMT -5
I think you have to be careful with that and somewhat more judicious. Even $4M is still a lot of money and you would prefer not to flush it down the toilet. The salary paid to a player even one not on the roster is an investment and no investment should be made with an expected NPV of < 0, no matter your budget. The factors involved should be. #1 The marginal value of the expected draft pick (or the value of the player you expect to draft - the expected bonus) #2 The probability of the player accepting the QO. #3 The amount of salary you expect to eat if the player does accept. For instance let's say you the draft pick has a marginal value of $2M, and you think that there is an 80% chance that the player will accept the QO and you will have to trade him and eat say half of the contract $7M. In this case, your expected cost is $5.6M (or $7M * 80%) and your expected return is only $.4M ($2M * (1-80%)). There is no way that you would offer the player in this case a QO since $5.6>$.4M. Additionally there is always the risk that the player may get hurt during the off-season and be untradeable. For these reasons, I don't think you will see large market teams aggressively employ the strategy that you outlined above. In many cases, it's not rational to do so, because the expected profit is less than zero. a Aren't you leaving out the value of the player we might get back in trade for Drew? This is not like dumping a guy who should be playing 2b--this is a real top 10 SS who at a cost of $7M could be a great asset to your trading partner. Of course it all depends on performance the rest of 2013.
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Deleted
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Post by Deleted on Jul 22, 2013 11:55:57 GMT -5
The analysis that you posted ignores the time value of money which isn't negligible here. You have to pay that singing bonus right away and you might not see some of that FWAR for 10 years after you draft the player.
Also the analysis suffers from realistic testing of the model. The theory behind the model is that the draft suppresses salaries such that teams receive an arbitrage benefit by buying assets for less than the discounted cash they will throw off during their useful lives. If the draft were done away with, and players were drafted in a completely free market, then in theory the arbitrage should disappear.
What that would mean is that if all players amateur players eligible for the draft were declared free agents the night before the draft the player would receive a contract worth the excess value in the study + the signing bonus they actually received. For example, Billy McKinney, drafted 24th and thus smack dab in the middle of the 16-30 tier, would have received a signing bonus of $10M were he a free agent. Do we really think that is true or even close to true? Because if it isn't you have to rethink the entire model presented.
The international free agent market prior to the current CBA was much closer to a completely free market. The largest signing bonus ever for an international signee was less than $5M. Given this does it make sense that the 24th best amateur signee would receive twice that? It doesn't to me.
The number I used for the value of a draft pick was kinda arbitrary, but I think it's a lot closer to being correct than you think it is.
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Post by Deleted on Jul 22, 2013 12:00:21 GMT -5
No because you would have to eat more salary in the example that I used to receive such a player. Let's say that the market values player X at $7M and you are paying him $14M. If you eat $7M you would not expect to get a player of value back because that would result in a net-loss for the team acquiring the player.
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Post by jmei on Jul 22, 2013 12:11:49 GMT -5
International free agency is totally different-- raw 16-year-olds with few scouting looks against appropriate competition present exponentially more difficult projection issues that the 18-22 year olds in the Rule 4 draft. I absolutely think that in a true free market, the 34th best player in a given draft would receive a signing bonus in the range of $7m (my hypothesized surplus value + 2013 draft slot value). Look at how much money Cuban defectors get-- you don't think a good high school or college player could get as much as Dayan Viciedo or Noel Arguelles? Here's an analysis from 2005 that does include discounting. Silver concluded that the value of a late first-round pick was $3.24m. Between inflation in general, inflation in the cost of a win (the article has $2.14m per win), and the added flexibility that extra bonus money provides under the new CBA, I don't think it's a stretch to say that that pick might be worth $5.5m. I certainly think $2m is way, way too low, especially for a front office like this one that clearly values draft picks a lot (as evidenced by the unwillingness to give one up last offseason). EDIT: here's another oldish article with discounted draft values-- a pick in the comp pick range should provide between 2 and 3 discounted wins over the period of team control. That's surplus value of roughly $8m-$13m.
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jimoh
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Post by jimoh on Jul 22, 2013 12:17:36 GMT -5
Since Drew turned down more $ from the Yankees to be 3b/util, we can also increase the likelihood of his turning down a QO by saying, honestly, that Iglesias and Bogaerts both have a chance to take the starting job away from him. Right?
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Post by raftsox on Jul 22, 2013 12:18:19 GMT -5
I wouldn't offer Salty a QO. The market for catchers is financially suppressed compared to other positions. A QO would make him one of the three highest paid catchers in the league. He's in the third (of four) tier of catchers according to WAR and we all know defensively he's merely passable. A QO would kill any outside market for him and would be a gross over-pay. If the Sox want to re-sign him then a 9-10M AAV should do the trick over 2-4 years, there probably wouldn't be much competition for his services, especiall amongst competetive teams. [...] Isn't $9-10M per for 3-4 years and maybe even for 2 years a more attractive deal than 1 year at 14 or so? Is the Sox really want him for 2-4 years, and can afford to risk the 1 x 14, why wouldn't they want to "kill the market" for him? If they want him back and want to work out a longer-term contract they could do what they did with Ortiz last season. However, I doubt there's a market for Salty that includes losing your first round draft pick. Making a QO essentially guarantees that he's back in a Sox uni for 2014, but at a significant raise.
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Post by johnsilver52 on Jul 22, 2013 13:10:06 GMT -5
Okay, so, I'm not implying that I think they should, but could the Red Sox, in theory, decline Lester's option and offer him a qualifying offer? Would they get more by picking up his option and trading him? Would he decline a qualifying offer? We sometimes think a lot alike. Have been having that same thought myself since he started slipping in May. What is the big difference between 11m and 14m really you know? Let Lester make up his mind if he wants to leave and seek a bigger payday elsewhere next year if he can. I see -0- chance he is back after 2014 regardless. His cutter is nothing like it was 3y ago, his FB is 3-4 ticks off. Only thing the Sox FO will be looking at rest of the season? *if* one of the featured kids is ready to help in 2014 and if possibly the team will look at getting a mid-back end veteran to help when another is also ready to step in by the early part of 2014. Expecting Bucholz back by at least 2014 regardless. A supplemental pick for Lester? I'll take it.
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Deleted
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Post by Deleted on Jul 22, 2013 14:04:17 GMT -5
In short no I don't.
First off the players that you mentioned didn't receive $7M in PV dollars. Viciedo had 60% of his contract deferred over the next four years. Arguieles didn't receive a signing bonus at all, according to Cott's anyways, and had all of his contract deferred over five years.
Second, you need to ignore how these players actually performed. Their contracts were based upon expected future performance at the time the contract was signed. The Viciedo contract was based upon the White Sox expectation that he would be a major league regular 3B within a year (see link below). That's far more than you would expect from the 34th pick in the draft.
I sincerely doubt that the 34th best amateur prospect would receive $7M. Further, I don't think that picks 31-60 would receive a combined $143M. The analysis assumes nearly $600M total spent on the draft or a little less than 10% of total revenues.
Further I think that the discount rates used in both articles that you cited in your last post are too low. Rany at least attempts to explain the discount rate some. I would think that amateur baseball players are assets that have above average risk and an investor in such assets would demand a return greater than the 5% that Silver uses, or the 8% used by Rany.
MLB rules have suppressed the international market by roughly 13%. You are saying that draft rules have surpressed the amateur market by over twenty times that amount.
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Post by Deleted on Jul 22, 2013 14:11:21 GMT -5
Okay, so, I'm not implying that I think they should, but could the Red Sox, in theory, decline Lester's option and offer him a qualifying offer? Would they get more by picking up his option and trading him? Would he decline a qualifying offer? Answer. I don't see a reason why they could not do this though I am not sure it would be rational to do so. In theory you should get more for Lester if you were to exercise his option and trade him rather than not exercising his option and giving him a qualifying offer. The reason being that you would have a free and fair competition for Lester's services for which the Red Sox would receive market value in compensation. In the later scenario, compensation is capped at a draft pick. I actually think that unless he completely falls apart, they should exercise Lester's option and have him pitch for the Red Sox next year. The Red Sox are unlikely to sign a better player for $13M total.
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Post by johnsilver52 on Jul 22, 2013 14:20:36 GMT -5
Okay, so, I'm not implying that I think they should, but could the Red Sox, in theory, decline Lester's option and offer him a qualifying offer? Would they get more by picking up his option and trading him? Would he decline a qualifying offer? Answer. I don't see a reason why they could not do this though I am not sure it would be rational to do so. In theory you should get more for Lester if you were to exercise his option and trade him rather than not exercising his option and giving him a qualifying offer. The reason being that you would have a free and fair competition for Lester's services for which the Red Sox would receive market value in compensation. In the later scenario, compensation is capped at a draft pick. I actually think that unless he completely falls apart, they should exercise Lester's option and have him pitch for the Red Sox next year. The Red Sox are unlikely to sign a better player for $13M total. Understand that side also there. The other possibility some are thinking, is that Lester could be trending onto the downside of his career and that he may not draw much/anything in a trade during the 2014 season.
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Post by Chris Hatfield on Jul 22, 2013 14:48:17 GMT -5
Again, remember, not a single player offered a QO accepted it last year. Yes, the saga of Kyle Lohse may be a bit of a warning for future QO guys, but I wonder how much of that was holding out for a good offer versus having no offers. Its also important to note that teams were extremely hesitant to give QOs last off season. Only nine guys were made QOs last year; all were better players than Napoli, Salty, or Drew. Big market teams like the Rangers and the Dodgers did not qualifying offers to Napoli, Dempster, and Victorino. Maybe Texas and LA were kicking themselves at the winter meetings, or maybe they believe that those players were only signed because they did not have draft pick compensation attached. It will be interesting to see if were qualifying offers are made this off season. Fair point on the hesitancy. That said, I don't know if I'd call BJ Upton a definitively better player (and I know that isn't necessarily the wording you used) than any of the guys being discussed. It's more of an assessment of the market for a player than of how good they are, I think. Also, note that Dempster and Victorino were traded midseason, so they couldn't be offered the QO. It would be interesting to figure out which players were free agents last year and SHOULD have been offered the QO. Offered: Hamilton, Bourn, Kuroda, Laroche, Lohse, Ortiz, Soriano, Swisher, Upton. Ortiz, Kuroda, and Laroche re-signed, but the other 6 all found deals elsewhere. Hindsight QO candidates, based on who got at least 10M/yr AAV (with the caveat that these players probably don't get these deals if there's a pick attached to them, of course): Edwin Jackson 4/52 (Strikes me as the only head-scratcher, but Nationals also made QOs to Laroche Angel Pagan, 4/40 (You almost wonder if Giants should have offered the QO just to drive down his market if they were going to re-sign him) Jake Peavy, 2/29 (signed extension before QO deadline, and otherwise would have had a QO I think) Torii Hunter 2/26 (Exactly the type of player a team should be wary of offering a QO - an older player whose market would have been hurt very much by a QO) (Note that Greinke, Victorino, Dempster, Youkilis, and Sanchez weren't eligible for QO's as players who had been traded midseason.
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Post by Deleted on Jul 22, 2013 15:14:20 GMT -5
Wouldn't change the relative return for exercising the option versus letting him go and offering him a QO.
There is a risk with any player not performing up to his contract in any given year. I believe that several teams would be willing to assume that risk for 2014. In short, the Red Sox should probably exercise the option and keep him unless he completely falls apart in the second half or suffers a serious injury.
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Post by Kevin Pereira on Jul 22, 2013 22:05:16 GMT -5
If this was mentioned before, I'm sorry. But I think if the Sox make a QO to Drew, he'll accept it in a heartbeat.
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Post by tjb21 on Jul 23, 2013 13:50:58 GMT -5
If this was mentioned before, I'm sorry. But I think if the Sox make a QO to Drew, he'll accept it in a heartbeat. Yep, and he will be a good trade asset with the Sox paying a few million for an ok prospect in return. Sign me up.
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Post by GyIantosca on Jul 23, 2013 18:47:05 GMT -5
Can the Sox do this to Lester? He is in his option year ,team option for 14million, So the Sox decline it and instead give him a QO for about 13million? So they save about 1 million if he takes it. If not get the pick. Please tell me this can be done.
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Post by amfox1 on Jul 23, 2013 18:59:53 GMT -5
It can. It won't (he'd leave as a FA, someone would give him a multiyear deal).
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Post by thelavarnwayguy on Jul 23, 2013 23:34:51 GMT -5
I don't hate Drew at all but I don't think he's a trade asset if we give him a QO and he accepts. It is really interesting what the Cubs got from the Garza deal though. Strange things have started to happen with the new CBA. Values appear to have changed for short term rentals in some situations. There appear to be fewer top quality FA options especially for top pitching and teams do not want to lose those 1st round picks. It's tougher for top teams to stay on top.
To me, a deal for Peavy makes a lot of sense for teams like the Redsox, who have some luxury tax space and are in contention. Maybe we even get a pick when he leaves in 2 years. He won't come cheap. Are we willing to pay the price? There are still some partial salary dump options which make sense.
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Post by thelavarnwayguy on Jul 23, 2013 23:41:00 GMT -5
I wonder how Ellsbury feels regarding the Pedroia situation. It is interesting that they chose to give him a day off today. Probably unrelated but it is a slap in the face a little potentially. I like Ellsbury. I hope they actually try to bring him back but I wouldn't offer either of them $100 mil. Maybe they are both worth it technically but I'd rather focus on developing young talent and spend my money on top pitching.
Still trying to understand why we didnt make a run at Kuroda last winter. He has kept the Yanks in it all year and was obvious consistent, premium talent. A 2 year deal at $18 mil per year would have been an excellent option. He signed for a lot less. The season would be over by now if we had signed him. In other words, we would have almost guaranteed a playoff run by now.
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Post by mredsox89 on Jul 24, 2013 1:04:01 GMT -5
I wonder how Ellsbury feels regarding the Pedroia situation. It is interesting that they chose to give him a day off today. Probably unrelated but it is a slap in the face a little potentially. I like Ellsbury. I hope they actually try to bring him back but I wouldn't offer either of them $100 mil. Maybe they are both worth it technically but I'd rather focus on developing young talent and spend my money on top pitching. Still trying to understand why we didnt make a run at Kuroda last winter. He has kept the Yanks in it all year and was obvious consistent, premium talent. A 2 year deal at $18 mil per year would have been an excellent option. He signed for a lot less. The season would be over by now if we had signed him. In other words, we would have almost guaranteed a playoff run by now. The Sox went after him significantly each of the past two offseasons. Two years ago, they were tax capped with what they could offer due to the Beckett/CC/Gonzalez deals. They tried again this past offseason, offered more than the Yanks, but he chose to stay with NY
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Post by Deleted on Jul 24, 2013 2:19:57 GMT -5
It can. It won't (he'd leave as a FA, someone would give him a multiyear deal). Right and as mentioned earlier they would get more than the pick by picking up the option amd trading him.
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Post by rjp313jr on Jul 24, 2013 8:14:32 GMT -5
Ells doesn't want to sign. Has ade it clear he going to FA, Pedeys deal has zero affect on him.
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Post by semperfisox on Jul 24, 2013 10:27:48 GMT -5
Even though we have his replacement ready, I'd like to keep Ellsbury for the right price. A future lineup with him and Bradley is fine with me.
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