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Iwakuma and the Inefficiency of the Posting System

It’s been a while, so let me refresh your memories: Hisashi Iwakuma and Oakland were unable to come to terms on a contract, and the righty will remain in Japan next season. Iwakuma earns the somewhat dubious distinction of being the first posted NPB player not to sign with the team that had won his rights.

This is actually not a purely negative outcome for any of the three parties involved. Iwakuma’s inevitable move to the Majors is delayed by a year, but when he hits free agency he’ll be have all the leverage that comes with it. Oakland won’t have Iwakuma’s services, but recouped their $19.1 million posting fee, which was a large amount to wager on a 30 year-old pitcher with no MLB experience. The Rakuten Golden Eagles, Iwakuma’s NPB team, come out the worst since they’ve missed out on a revenue source that would have covered about 73% of their 2010 payroll, and can expect to lose Iwakuma uncompensated next year. But they only posted Iwakuma reluctantly, and retaining their ace gives them a much better ability to compete in a very balanced Pacific League.

The first thing that jumped out at me in this case is the particular inefficiency of the posting system. It’s a closed bidding process, which means that in theory, none of the bidding teams know the amounts of other bids, or if there are other bids. Speculatively, if the bidding process had been open, the A’s could have outbid their nearest competitor by a small amount and offered Iwakuma a more reasonable contract. Instead, the A’s submitted and outsize bid with the intent of using their leverage, while Iwakuma’s camp took the bid amount as an implication of the size of the contract he could command. I don’t buy any conspiracy theories on this one, I just think that it was a case of mis-matched expectations.

The other thing I noticed about this posting is that a confluence of things have to exist for a posting to be beneficial for everyone. For the posting using to be worth using for the player, pros of getting in MLB quickly must outweigh the cons of only being able to negotiate with one team. For it to be worth it (financially, at least) for the acquiring MLB team, the team must be able to sign the player at a salary low enough to counterbalance the cost of the posting fee. For it to be worth it for the NPB team posting the player, it must be clear that the player is going to eventually depart anyway, or that the player’s absence won’t affect the team competitively. Judged by these criteria, only a few postings have really worked out well for all parties involved: Ichiro, Ramon Ramirez and Akinoris Otsuka and Iwamura.