IPL Auction 2018 - RTMs

The IPL auction has been described as unfair, humiliating, and voyeuristic*. But most critics would still admit that, for the emotionally detached observer, it is flipping entertaining. There are so many factors to unravel that influence prices and teams battle an armada of seductive cognitive biases. For a data lover like myself, it provides a brand-new dataset that indicates how cricket insiders might think

For the full rules of the auction, CricBuzz has a good summary. The important points are that teams could either retain players before the auction (for a fixed cost) or let them go and use a “Right-to-Match” card (RTM) during the auction itself. Teams could invoke each option up to three times and only five players could be retained in total

Retention choices made by each team during the IPL Auction 2018 - both pre-auction choices and RTMs

The RTM card allowed the teams to sit out bidding for their existing squad members. Once the bidding process was over, they can decide to retain the player by matching the highest bid. This gives the team a significant advantage. Normally, the team who values a player highest would secure their services but with an RTM card the incumbent only needs to be within the top two**

Well this is how it would work on Planet Rational. The IPL auction is far from rational. Among many, many others, there are two significant biases that affected how teams made retention decisions: loss aversion and endowment bias

* My personal opinion on the auction being unfair / humiliating / voyeuristic is: definitely, maybe, and “Yes, that is the whole point”
** If Mumbai value Krunal Pandya higher than all other teams then they will obviously choose to match the highest bid made by other teams. However, if they value Krunal higher than all teams but one, then that first team will still have to stop bidding once the third team pulls out. That means that the Mumbai Indians only need to pay one bid above what that third team was able to pay. This may be tricky to understand but it is important when analysing the decision that teams made

Pre-auction Retention

On average, teams spent 11.5 Crore on domestic players and 11.3 Crore on overseas players before the auction. Using my Runs Added metric, the overseas players were far more valuable than the domestic players (4.2 vs 2.2). This is completely reasonable given that teams pay a premium for domestic talent due to the league restrictions on overseas players

Teams spend similar amounts of Crore to retain domestic and overseas players before the auction started. The price for RTMs was also the same. In both cases, overseas players are more talented than the domestic players

My guess is that most teams consciously made retention decisions based on whether they thought the price would be higher at auction. They started with the assumption that they need to keep the player and try to find the cheapest way to do so. This leaves them open to the effect of loss aversion, the in-built human instinct to take the sure thing (retention) over the uncertain (auction). The instinct to avoid regret

Luckily, the fixed retention costs were generally favourable to teams. Jaydev Unadkat, KL Rahul and Manish Pandey all went for 11 Crore at auction and give us an idea for what the top domestic talent is worth. It is very plausible that Rohit Sharma would have cost more than 15 Crore if the Mumbai Indians had released him to the open market

It is also important to consider that Delhi, Kolkata, and Punjab didn’t actually pay the full cost to their players and used the retention process as a way to save money. The salary cap deduction is almost irrelevant as these teams are also looking to maximise overall profits

Pre-auction retentions list.PNG

There were a few cases where teams paid more than they needed to, fearing that they would regret letting the player go. I do not believe that either Suresh Raina (cost CSK 11 Crore) or Ravindra Jadeja (7 Crore) would have cost that much at auction. However, it is possible and, as always, there are other factors to consider, the preferences of MS Dhoni being one in this instance

On the other hand, I am 100% certain that Steve Smith (12.5 Crore) could have been retained cheaper by the Rajasthan Royals. They didn’t even use all their RTMs during the auction. Chris Lynn, Glenn Maxwell, Rashid Khan were the most expensive overseas players sold and none went for more than 10 Crore. Even before the auction I suggested that the price was too high

The True economy for Chris Lynn, Glen Maxwell and Rashid Khan are far more impressive that Steve Smiths stats

Resisting loss aversion requires taking the calculated risk over the known quantity. Rajasthan Royals would have had a better deal purchasing Steve Smith at the auction

Endowment Bias

In an experiment conducted by researchers from Vanderbilt and Georgia State University, chimps were trained to participate in trades. And there was a significant difference between how they made choices depending on what they already possessed. Given an open choice between peanut butter and fruit juice, 40% went for the fruit juice. But this decreased to 20% when the chimps encouraged to swap peanut butter that they already owned for a new carton of juice. They were reluctant to give up what they already had

Not that I need to compare IPL decision-makers to chimps. One of the more famous experiments by Daniel Kahneman and Richard Thaler showed that humans valued mugs (the things you drink coffee from) higher if they already owned the mug. The price they were willing to accept to sell the mug was about twice as high as the price they would pay to buy it. Another study demonstrated that students’ perception of the value of NCAA Basketball tickets increased almost 15x when they were the ones being asked to part with the tickets

The implications for IPL teams are obvious. When the bidding starts they are likely to accept a much higher price to retain a player in their team than they would to acquire somebody new. And this time we are not talking about a mug... we are talking about a human being with whom team management is emotionally invested

RTM Decisions

Whilst the initial retention decisions were mostly sensible, the RTM decisions made at auction were clearly affected by endowment bias

There were 45 occasions where a team could use an RTM card, not including unsold players or players bought back by their own teams. If we assume that it is random as to which team values each player highest, then we would expect the incumbent team to be in the top two 25% of the time. Therefore, we would only expect teams to use an RTM 25% of the time (see above). Yet teams exercised their right to RTM on 19 occasions – 42%

42% of RTM opportunites were taken by teams

Obviously, that initial assumption is questionable. Perhaps the reason that Rashid Khan is with Hyderabad already is because they have always valued him higher than other teams. Perhaps Rashid’s game suits the conditions of the Rajiv Gandhi stadium. Perhaps the team values cohesion enough to pay a premium to keep their core intact

But it is also worth pointing out that my chart massively undersells the phenomenon. Teams only had a limited number of RTMs to use and almost every single one was used at some point during the weekend. The only team who didn’t use the full quota was the Rajasthan Royals… and their options were terrible

Sunrisers did not turn down the opportunity to retain Kane Williamson and Mustafizur Rahman because they didn’t think the price was right. It was because they were saving their overseas RTM for Rashid Khan. Teams are making a binary “yes/no” choice on each player before the auction even starts

Rashid Khan

Let’s think about what happened with Rashid Khan. There is no way that teams did not discuss Rashid Khan before the auction. Every team will have thought about what they would be willing to pay for him. About how his late position in the bidding order would affect prices. About how Sunrisers Hyderabad would probably want to keep him in their team. Every team will have had a price

Rashid bidding.PNG

Kings XI Punjab opened the bidding for Rashid Khan (CricBuzz have some awesome bid-by-bid graphics). They were joined by Rajasthan Royals who took the price to 4.2 Crore before stepping aside. Seriously – they wouldn’t pay more than 4.2 Crore for Rashid?

Then came the Delhi Daredevils who temporarily pushed the price above what KXIP were willing to pay. Two Royal Challengers Bangalore bids later and Delhi were out but KXIP were back in. Eventually, KXIP were the last team standing at 9 Crore

Throughout the bidding, the teams often needed to ask for time. They were either near or beyond the pre-agreed price and they needed to discuss amongst themselves. This was a lot of money and they needed to be confident that Rashid was worth it…

Not true for Sunrisers Hyderabad

Seconds after the bidding was over, they had their RTM card ready to bring him back. They weren’t even close to their max price. They valued Rashid Khan so much higher than the other teams that this was a simple decision. And this happened with other players and other teams. The Mumbai Indians took seconds to RTM Krunal Pandya at 8.8 Crore (and then openly celebrated). The Kolkata Knight Riders took seconds to bring back Robin Uthappa

I would argue that there were only two occasions throughout the entire auction where a team was discouraged from using an RTM because the price was too high. KL Rahul and Manish Pandey were released by RCB and KKR, respectively, because the price went too high. On every other occasion, where a team was planning to use their RTM, they used it

RTMs are designed to help teams maintain continuity in their squads. But the real effect is to hurt teams by encouraging them to overvalue what they already have

Teams are not making a conscious decision to value continuity and pay a premium to retain their existing squad. If this were true, then you would see them bidding higher to keep other existing squad members. That did not happen often – the only big money purchase that retained an existing player was by Sunrisers Hyderabad to keep Kane Williamson

What teams actually did was decide who they would RTM before the auction. And then they did it