Wisdom of the Crowd: The Dynasty Market

Brian Malone


This is the first in an irregular series of articles called Wisdom of the Crowd, in which I’ll discuss particularly interesting topics that bubble up in the DLF Forum.

Before we dig in, a story:[i]

During World War II, Allied soldiers who had been captured by the Nazis were housed in prisoner of war camps, which were organized by company. The prisoners survived almost solely on Red Cross rations (canned milk, cheese, canned meat, biscuits, jam, butter, chocolate, and cigarettes). Trading – or any interaction – between companies was rare, but most companies had an active barter economy. One of the few people who associated with all the companies was the chaplain, and it didn’t take long for him to recognize an arbitrage opportunity. One morning, he left his bunk with just a tin of cheese and five cigarettes. By the time he returned that night, he brought home the cheese and cigarettes, plus an entire extra ration worth of food and smokes. The padre made his profit through free exchange: he knew the various prices in each company’s barter economy, and he traded away his most valuable goods at each stop, acquiring goods that were more valuable to other companies.

Now, to the topic at hand. Many dynasty writers like to talk about a player’s “market value” as if the dynasty community were a stock exchange on which players could be readily bought and sold for an established price.

​Forum user Csl312 takes umbrage with this analogy. He is far from the first to do so, but his critique and the discussion it spawned provide some real insight into how we should approach our leagues. Here’s the gist of the critique, with links to posts that provide more detailed arguments:

  1. Unlike a stock exchange, dynasty leagues are thin markets (with few buyers and sellers). This causes illiquidity and price uncertainty.
  2. Individual leagues are more idiosyncratic than the stock exchange analogy presumes. Even if a player’s consensus trade price rises or falls, an owner in any particular league may not be able to take advantage.
  3. Unlike a stock exchange, dynasty leagues have no high-volume market makers to help establish prices.
  4. In dynasty, the goal is to score points and win games. Assets produce points, but you cannot directly buy points or wins and you cannot reinvest points or wins to acquire more assets.

But the stock exchange analogy has its defenders. First, they note a dynasty league is indeed a market, and (in most leagues, at least) rookie picks are a currency that improves liquidity. They also countered that tools like Ryan McDowell’s ADP and the DLF Forum help level off league idiosyncrasies by creating a consensus range for player prices. Finally, some explain that a savvy trader who knows his leaguemates can treat his league more like a stock market because he is more likely to be able to find a willing buyer or seller at consensus prices.

[inlinead]Others propose different markets that may be better analogies. The real estate market gained the most traction: it’s primarily a local market (prices in Dover don’t much affect prices in Denver), and it’s much thinner than a stock exchange. Finally, some emphasize that, regardless of the right analogy, it’s useful for owners to view their dynasty team as a portfolio of assets, and tools for stock valuation can be adapted to value dynasty assets.

After letting this topic marinate for a while, the best analogy I could think of for the dynasty market is the WWII POW camp described in the story above. The prisoners formed fairly thin markets, with only about 200 potential buyers and sellers. And individual companies had idiosyncratic preferences – for instance, the largely Hindu company from colonial India had very little interest in canned beef.

But the reason I like this analogy most is because I fashion my dynasty strategy after the priest. Obviously, I can’t trade players from one league to another. But I play in roughly ten dynasty leagues, and this creates an opportunity for me to build my total portfolio by trading the same assets in different leagues. For example, earlier this offseason I traded Brandin Cooks for Jeremy Hill in one league and Hill for the 1.03 in another in less than a week. I knew I preferred the 1.03 to Cooks, and Hill was just an intermediate step.

More generally, I try to exploit the nature of individual dynasty markets by taking advantage of consensus values. I’ll almost always sell if someone is offering more than the consensus price because I know I can probably buy for the consensus price in a different league. And regardless of how much I like a player, I rarely pay more than the consensus price for him because I know I can almost certainly get him at the consensus price somewhere else.

Buying players at below-consensus prices is a different story (unless I already own the player in another league). I tend to presume an owner offering me a discount has tried to sell to other owners for more and has been spurned, so there’s probably no immediate arbitrage opportunity. Knowing that, I’ll only buy players (even at below-consensus prices) if I think they’re likely to out-produce their current value, at least for long enough that I can flip them. In this way, the priest has an advantage, as he can buy at below-consensus prices from one company and sell to another.

Ultimately, there’s no perfect analogy to the dynasty market(s). But if you’re looking for a strategy on how to maneuver the market, I’d recommend using a priest as your role model.

[i] This account is drawn from R.A. Radford, Economic Organisation of a POW Camp, available online at http://www-rohan.sdsu.edu/~hfoad/e111su08/Radford.pdf. Radford describes it as a story with “a germ of truth.”

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