Buyers pay a premium for talent at the trade deadline when compared to the regular season. The production of a difference-maker in the playoffs — or just in a pennant chase in the regular season — is extra valuable right now, and it’s not just that talent is scarce. The wins themselves matter more. Today, I’ll show that the value of wins is actually about 44% higher now than it was at the beginning of the season.
Jesse Wolfersberger did a great job last week highlighting the effect of the new wild-card spot on the marginal value of a win, in terms of playoff probability. It is important to remember that what Jesse found related to the effect of getting one additional win on the probability of making the playoffs, based on what you know about your competitiveness at the beginning of the season. But in the middle of the season, it is far clearer to the Braves and to the Angels that one win might make all of the difference, since they both know that they are in the thick of the race and that there are a bunch of other teams near them in the standings. This makes the value of talent now higher than it was before the season started.
In Diamond Dollars, Vince Gennaro estimated the value of a five-win improvement for each team from both 78 to 83 wins and from 86 to 91 wins, showing that wins are more valuable when you consider the impact of making the playoffs. For the teams with the largest impacts of going from 86 to 91 wins, the value of is actually about four times as big from 78 to 83 wins. This gives us a framework to break down the market value of players into two separate components. The first component is just the common value to all teams of increasing regular season win total, while the second component is the salary paid to players for their effect on making the playoffs. Since the value of going from 86 to 91 wins is about four times as large as the value of going from 78 to 83 wins for the teams in the biggest markets, the component reflecting the share of salary paid to players for their effect on making the playoffs is about 75%, which makes sense considering how much more frequently competitive teams sign free agents.
Next, we can look at the difference in playoff probability per win added for teams that know they are competitive as of late-July, versus the playoff probability per win added for teams before April. It’s very hard to know if one win is actually going to be the difference in between making the playoffs and missing them before the season begins. Even for the most competitive teams in the most competitive divisions, the odds of one win making the difference are only about 6%. The reason the odds are so low is because sometimes teams run away with their divisions between April and July and don’t actually need to add talent (see: Phillies, 2011), and sometimes teams that look like they are going to have a good chance of getting into the playoffs don’t actually have much chance at all (see: Phillies, 2012). However, for teams like the Braves and Angels, they now know that a single win will increase their odds of making the playoffs by nearly 11% — instead of just the 6% that they would have expected their odds to change per win added at the beginning of the season.
Combining the fact that we know that the playoff-probably effect is about 75% of the value of a win — and the probability of one win making the differences for some teams is now almost twice what we knew at the beginning of the season — we see just how sharply the value of a win has increased for competitive teams since April. Combining this with the extra potency of having a slightly better team in the playoffs, we find that a win is worth about 44% more now than it was in April. That makes wins worth more than $9.1 million, which is way more than my pre-season estimate of about $6.3 million per WAR. That means that the value of a player’s performance (i.e. before salary is considered) is about 48% of his full-season value with only 33% of the season to go. When you consider the leveraging effect that salaries have, a contract like Zack Greinke’s — with a salary that is about 40% below what his full market value — would be worth about 70% of what he would be worth with his salary attached at the beginning of the season in a trade.
Of course, without draft picks attached, teams are not going to get the in-season value that they used to, but all of this shows just how high mid-season value still is. For above-average players, they will still be worth more now than they were before the season started, even though teams would actually have received draft picks if they traded for them.