Winner’s Curse in Baseball (a look at sports economics)

This article regarding baseball raises a plethora of valid arguments regarding the auctioning system of free-agent baseball players. One thing I found particularly interesting about this article was the methodology used to value various free agent players, the author explains that a player’s value is measured by first statistically comparing a teams number of wins with their revenue and then multiplying that value by an individual’s marginal win value. Baseball and other team playing athletes are in that respect, difficult to value since we do not have perfect information and more importantly because it is nearly impossible to calculate precise monetary values of individual players because sports franchises earns more money based off of a team victory not based on individual contribution, or to put it more eloquently the whole is greater than the sum of it’s parts.

The article goes into the flaws of individual valuation more in depth and also discusses a few other potential pitfalls to trying to minimize the winner’s curse in this market. The reason I focus so heavily on the valuation aspect of this academic journal is for two reasons: one, because I believe that trying to accurately value an item (in this case a human being) is the most important step in minimizing an individuals winner’s curse, and two because the idea of trying to giving a human being a value in dollar terms or any numerical representation seems to me both a difficult process and also slightly disturbing one.

http://college.holycross.edu/RePEc/spe/BurgerWalters_WinnersCurse.pdf

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