Weighing Trades and Free Agents

When we’re looking at teams adding talent in the offseason – which is something that, thankfully, we typically expect today’s Detroit Tigers to do – there are two (maybe more) ways to go about it and both have their costs.

Sep 12, 2012; Arlington, TX, USA; Texas Rangers shortstop

(1) tags out Cleveland Indians right fielder

(17) trying to streal second base during the third inning at Rangers Ballpark. Mandatory Credit: Kevin Jairaj-US PRESSWIRE

Players acquired in trade usually (but not necessarily) will have more favorable contract terms than free agents, but they will also rarely be significantly underpaid (unless you’re talking about trading for major-league-ready prospects). The reason – by and large – to go after guys in trade, like a Shin-Soo Choo for example, is to get a player that gives you better expected value per dollar than the free agents that you could sign instead. You all know this.

Players in trade also require packages in return, which tend to involve some of your team’s best prospects. You all know that too. And… top tier free agents, while they cost a boatload of cash, are going to cost you a draft pick too. This is non-trivial and the restrictions involved in the new collective bargaining agreement may have altered the calculus in a real way.

Look at it this way: suppose that trading for Shin-Soo Choo would require Nick Castellanos (the Tigers’ top prospect) and a handful of guys that you’d never miss. Does that seem like a steep price to pay? Of course it does, and it is. The thing is, when you sign a top free agent you lose your first round pick (even though you no longer give it to the other team) and Castellanos wasn’t really even a first-round pick. He was a first-round talent, but fell due to concerns over signability. The Tigers were able to convert – in effect – their sandwich pick into a first-rounder by paying way over slot and that is something that they can no longer do. What that means is that a team without first-round picks is going to have a more difficult time stocking it’s farm system by other means.

When the Tigers signed Prince Fielder, they gave up at least a Castellanos. When they signed Victor Martinez, they gave up at least a Castellanos. When they signed Jose Valverde, they gave up at least a Castellanos. It never felt like such a steep price (though the dollars did) because we lost prospects in potentia rather than guys that we had been following. Does anybody know how those picks have panned out so far? I don’t. There is a term for this kind of phenomenon in behavioral economics – “loss aversion”. It doesn’t feel as bad to not get something as it does to lose something, so we tend to make systematically bad decisions as a result. Now, even if a team is in a win-now mode prospects have real value – since they are the currency of midseason player acquisitions. Getting Omar Infante and Anibal Sanchez, for example, took their 2009 first-round pick and their 2010 third-rounder. The best move for the Tigers is probably to sign guys that don’t cost picks, since they have a willingness to spend as well as a thin farm system. The second best move is probably to trade away existing prospects to fill those holes in the lineup. The worst move is probably to sign big-name guys that cost – ultimately – next year’s “Tigers #1 prospect” as well as untold millions.