The Winner's Curse and the Yankees

So the Yankees aren't quite as bad as we've been led to believe. (At least, until Petite also pulls his hamstring.) They've taken two of the last three from the Red Sox. That said, it's still obvious that the Yankees are one of the most least productive baseball teams when looked at through the prism of salary vs. performance. Ben Fry has a fantastic chart illustrating this.

Why do the Yankees get such a measly rate of return from their players? The answer, I believe, involves the winner's curse, which is the old dictum that, in auctions with incomplete information, the winner tends to overpay. Free-agents in baseball are perfect examples of the curse in action. Nobody really knows how the player will perform in the future, and the auctions are usually blind, which encourages people to speculate. The end result is a frenzy of irrational bidding.

In the case of the Yankees and the Red Sox, the rivalry inflames this tendency. They make bad speculative bids simply to keep the player away from the other team.

Now the enmity has been moved to a higher level of battle, to team front offices, where the dollars and sense seem to move in opposite directions. Enemies? You bet. In the modern era of escalating salaries, the Red Sox and the Yankees have become their own worst enemies.

Last night at Yankee Stadium provided the setting for a good example in how a wonderful rivalry has made reckless bedfellows. On the first-base side of the diamond, the Yankees waited another day to announce whether Carl Pavano would have season-ending reconstructive elbow surgery. There may be a sliver of hope that Pavano will return to the Yankees, but it felt more like forestalling the inevitable. Pavano is more than likely a $40 million humiliation waiting to be registered on the loss part of the ledger.

Does the winner's curse have a cure? Knowledge. When people are told in advance about the winner's curse, they are more prudent when bidding on ebay. Perhaps it's time somebody tells Steinbrenner about the curse.

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Well, you just got to take each game as it comes, give 110% effort, and of course respect the opponent. That said, Red Sox SUCK! Go Yankees!

The Yankees suck this year because theyre old and theyre burdened with steroid heroes (Giambi, Abreu) who no longer perform at an All-Star level. (I cant wait to see the Sox tee off on that HGH-bloated pile of human greed known as The Rocket, who is going to make about $1 million per appearance.) The whole world should look to the Yankees and see what is reaped when you load a team with aging All-Stars. Who in the starting 9 is under thirty? Cano? Meanwhile, theyre calling up every young arm so that he can either get injured or have his confidence set back a year. Chase Wright, anyone?