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Risk equivalence as an alternative to balancing mean value when trading draft selections and players in major sporting leagues

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  • Geoffrey N Tuck
  • Shane A Richards

Abstract

In sports leagues that use an annual draft to assign eligible players to clubs, having a value associated with a draft selection can allow clubs to anticipate future growth of players and, if a trading period exists, assist negotiations when exchanging draft selections and players. Typically, mean draft values often decline in either an exponential or geometric manner with increasing draft selection number. Aggregate mean values have been used to compare trade packages. However, clubs may also want to ensure that a trade does not increase the probability of obtaining poor players in the draft. This paper therefore considers equivalence of risk as an alternative trading strategy for club list managers. Here, risk is defined as the probability of the aggregate value of the received draft selections being below a minimum acceptable level. For risk equivalence, a premium over and above mean market value may need to be provided when trading to secure higher draft selections.

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  • Geoffrey N Tuck & Shane A Richards, 2019. "Risk equivalence as an alternative to balancing mean value when trading draft selections and players in major sporting leagues," PLOS ONE, Public Library of Science, vol. 14(5), pages 1-15, May.
    • Handle: RePEc:plo:pone00:0217151
    DOI: 10.1371/journal.pone.0217151
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    References listed on IDEAS

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    Cited by:

    1. Jemuel Chandrakumaran, 2021. "The AFL Pick Trading Market as a Coasian Utopia," Journal of Sports Economics, , vol. 22(1), pages 75-84, January.

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