Marlins Avoid Winner's Curse with Fielder, Pujols

Last week, Prince Fielder signed with the Detroit Tigers for nine years and $214 million. This deal constituted the fourth-largest contract in major league history, behind only Alex Rodriguez's two free agent deals and Albert Pujols's most recent ten-year deal with the Los Angeles Angels.

Why do I bring this up at Fish Stripes, a Miami Marlins blog? Well, if you will recall, the Marlins were major free agent players this season and at one time or another were linked to both Fielder and Pujols before they were both signed by other teams. Many fans were clamoring for either of these moves, as these players would have been dynamic additions to the Marlins' current team. However, it is clear from the size of these two deals that the Marlins actually avoided major pitfalls by falling by the wayside in their attempt to acquire either player. See, with the amount of money the Marlins appeared to have been willing to spend this season, it could have been very easy for the team to "go nuts" and pick up one of these two guys. The problem with either move would have lied in the concept of the "winner's curse."

Wikipedia has a perfect definition for the winner's curse.

The winner's curse is a phenomenon akin to a Pyrrhic victory that occurs in common value auctions with incomplete information. In short, the winner's curse says that in such an auction, the winner will tend to overpay. The winner may overpay or be "cursed" in one of two ways: 1) the winning bid exceeds the value of the auctioned asset such that the winner is worse off in absolute terms; or 2) the value of the asset is less than the bidder anticipated, so the bidder may still have a net gain but will be worse off than anticipated.

It is an easily understood concept: the player in an auction with incomplete information that bids the highest is often the one that overvalues the product the most. This is because, in the case of sports free agency, teams have incomplete information, not only about the true value of a product (players, in this case) but about the bidding of other teams as well. This incomplete information leads the winner to be the "most irrational bidder" and one who receives the winning bid at a value greater than the asset's value.

It is easy to see how this affects free agency in baseball and in other sports. In this free agent period, this potential problem loomed large for the Marlins. During the Winter Meetings, it certainly felt like the Marlins were willing to go 100 percent into the 2012 season with little regard for the future. As a result, their new-found pile of money could have potentially gone to a variety of different free agents, many of whom may not have been properly evaluated. The Fish could have easily fallen prey to overbidding for either player and ending up with a better 2012 at the expense of a significantly crippled 2016 and beyond.

The Two Big (Potential) Fish

The two best examples were clearly Albert Pujols and Prince Fielder, the two biggest names in the free agent market this year. The Marlins were heavily involved in the bidding for Albert Pujols before he signed with the Angels at the end of that Winter Meetings session. The Fish were rumored to have offered Pujols a deal of about ten years and $200 million. After the Pujols deal fell through, many fans wanted the Marlins to shift gears and focus on Prince Fielder, who was a significant downgrade compared to Pujols. The Marlins wisely avoided pursuing Fielder, and despite concerns from outside the Scott Boras camp that Fielder would have to take a smaller deal, one team bit in a big way and Fielder got his massive contract.

Imagine for a second what the Marlins would have looked like with either Pujols or Fielder at the prices they would have commanded. Sure, the team would have been very strong in 2012 through 2014 or 2015; the nature of buying premium free agent talent is like that. But the team would have been severely hampered past the early few seasons of the deal, as it would have been very likely that Fielder or Pujols would have struggled to meet the demands of their bloated contracts beyond that point. In addition, it would have been likely that the Marlins would have had to overbid to the point that the overall value of the deal would not have matched the players' total contributions. We already evaluated that Pujols would be unlikely to match his Angels deal, and one glance at the Fielder contract makes it easy to believe that he will fall short of matching that salary as well. In essence, signing either player would have cursed the Marlins with a hefty, overvalued contract.

What Did the Fish Do?

The Marlins decided on another path, whether it was their plan or not. The team picked up Jose Reyes at an affordable, understandable price. We mentioned earlier that the six-year contract the team gave Reyes has a decent chance to match up, and that at worst the Marlins overpaid by $15 million total or $2.5 million a season. The Buehrle contract will depend on his consistency, so that may be a question mark. It is still very possible that the team was nailed with a "winner's curse" with both those signings. But neither signing figures to limit the Marlins in a big way past 2015, and neither overpay would have been by a huge amount.

Rather than go for one major move, the Marlins limited their risk by spreading it out and bidding less on two different players. They also avoided the big signing that could have brought them a larger winner's curse. In that manner, the Fish kept their options more open in the next six seasons and beyond rather than potentially hampering their future squad with one albatross deal. For the sake of the Angels and Tigers, they had better get their money's worth now, since based on our best projections, they were certainly saddled with what could be considered a winner's curse in their successful contracts with Pujols and Fielder. The Marlins, as can plainly be seen now, dodged two major bullets on both of those with their relatively shrewd spending.