The GM meetings were held this week and only a few deals were made. The Phillies signed Marlon Byrd for two years and $16 million dollars to add some right-handed hitting to their outfield picture and the Athletics signed Nick Punto to a one-year/$2.25 million deal with a vesting option. These relatively small signings are typical of this first gathering of MLB execs. These meetings are not about hammering out deals as much as feeling out the market. Agents and GMs will take what they learned here to prepare for the winter meetings in early December. What you really get from these weeks leading into the winter meetings is a lot of anchoring.
Anchoring is a principle in cognitive sciences and economics wherein people exhibit a tendency to base their decisions on the first piece of information they receive on subject. This principle is particularly important when it comes to price. Cars are priced well above their actual value, for example, because even though it is generally accepted that you shouldn't pay the sticker price, the high bar for the initial cost still raises final negotiated price significantly. For the early weeks of the off-season, most of the information coming out of front offices and agencies represents the baseball equivalent of this process.
Ervin Santana is seeking a $100 million deal. Ricky Nolasco wants $80 million. Want to ink Robinson Cano? Start thinking about $300 million. Reports like these are abundant in early November and from the moment they hit twitter, eyes begin rolling. Ervin Santana, for example, has been precisely league-average throughout his career by ERA- and more predictive numbers like FIP and xFIP tell basically the same story. So when you hear that he is seeking an average annual value on par with Justin Verlander and Matt Cain, checking the corners of your eye sockets for a possible explanation is a perfectly reasonable response.
In all likelihood, Santana (or his agent, at least) understands that he has not been comparable to those players and he probably isn't getting that type of money. Just putting that laughable figure out there probably helps him get more money, however. As the first price tossed out for a possible deal, that number becomes a touchstone for everything that follows, even if we don't think it should. Should Santana now sign for five-years/$75 million, the perception of that deal will be subconsciously influenced by that first, LOL-inducing figure.
The most fascinating part of this effect is that it stubbornly resists our attempts to defeat it. When I wrote about Santana in the free agent previews, I put a price of around four-years/$50 million on him. Since then, there has been some evidence that teams will spend more freely this off-season, but I still believe that is a reasonable deal given the added cost of draft pick compensation and his remarkable inconsistency. Even so, I can't help but view a deal like the aforementioned five-year/$75 million hypothetical as more reasonable now than I ever would have before that report came out. What seemed to me like an overpay of at least $25 million just a few weeks ago has now moved from the ridiculous-contract bin in my brain to the lesser deals-I-don't-like bin and absolutely nothing about Ervin Santana has changed. Even true experts, like GMs, aren't entirely immune to these effects, if studies on the subject are correct. They almost certainly start with their own estimate of each player's value, but hearing these bold claims probably still impacts their decision-making. It isn't clear how much money this tactic adds on average, but with dozens of examples occurring every November, agents must have some handle on its effect. They clearly believe it works.
This same process happens the other way, as well. Teams are setting their own anchors and reaping the benefits of their psychological effect, but their numbers don't make it out into print as often. For teams, this process is typically better left behind closed doors. For one thing, fans eager to see their club land a potential impact player might not love hearing a low-ball offer getting tossed around. There is also the risk that other teams will step into the middle of the process. Players have almost no disincentive against setting the bar as high as possible but teams need to be sure that their initial offer is still competitive enough to keep the player's agent talking to them. This week the Red Sox made a two-year offer to catcher Jarrod Saltalamacchia and fellow backstop Carlos Ruiz earned multiple offers, but neither player appears to be close to taking a deal. The numbers in those reports are fairly vague, but what information there is doesn't signal any all-out effort being made to reach a deal at this point. Right now, it seems teams are just putting their anchor offers out now and then seeing how close they are to market value. We see their side less clearly, but it is certainly happening.
The teams look far more rational than the agents and players this time of year, but that is simply because they can't just turn to someone like Ervin Santana and say, "we can do five years/$5 million," and expect a return call. The agents representing players are keenly aware of the market value of their players and it's their job to convince someone to pay more. Putting out a crazy number early in the process is an excellent way to do that. Take note of the next time a player's November salary demand causes you to you to spit-take and then look at their final deal. Does it look more reasonable thanks to that spit-take figure? Chances are, it will. The numbers being floated around right now are a tool of the market. They might be ridiculous, but they serve their purpose. You can roll your eyes, but you can't stop anchoring season.