On Surplus and Inflation in Keeper Leagues

The ottoneu keeper/cut deadline is less than two weeks away, and the ottoneu communities (official and unofficial) are buzzing with discussions about the keep/cut line of specific players and general keeper strategy. I’ve noticed some confusion regarding the definitions and implications of surplus and inflation as it relates to keeper decisions, so I’m here to explain as best as I can.

As the creator of the ottoneu Surplus Calculator, the concept of surplus is one that I’ve thought about ever since I played in my first auction keeper league almost ten years ago. For others, their only exposure to the term is the Surplus Calculator, and I wanted to make some clear distinctions between what surplus refers to on that tool and what it means in general. Surplus, in the broadest sense, is strictly the value of a player above and beyond their salary. To put it another way, a surplus asset is one where their expected production exceeds their cost. Do you own a $20 Kris Bryant? That is a surplus asset, though the specific amount of surplus depends on how much you think Bryant is worth. On the Surplus Calculator player worth is defined by the pre-loaded dollar values (currently based on Steamer), but just because a player shows as a surplus asset on the calculator it does not mean that every owner in your league will agree.

To reiterate, defining a player as a surplus asset hinges on whatever dollar values you are assigning to that player. Maybe that’s the values on the Surplus Calculator, maybe it’s those generated by the FanGraphs Auction Calculator, or maybe you’ve created your own values. One owner might think their player has $10 in surplus, while the rest of the league considers that player a questionable keeper value. Another term that is often thrown about by ottoneu owners is that of a par asset. A par asset is simply a player who has very near to $0 in surplus value. 

Now that we have laid the groundwork for what surplus means, why do we care? Well, in keeper auction leagues (like ottoneu), teams will generally keep their surplus assets and cut any negative surplus assets (those worth less than their salaries). That almost always means that the league as a whole has keepers that have salaries much lower than their actual worth. That disparity between the value of kept players and their cost/salary results in auction inflation. Auction inflation is the premium (typically expressed as a percentage) the league has to pay at auction to acquire a player. Simply, the effects of inflation mean that there is less talent available at the auction than there is money to spend.

Let’s look at a practical example in order to illustrate how to calculate inflation and what it means at auction. Based on my article from last year, the average FanGraphs Points league had 291 kept players with $3,252 in salaries and $3,453 in worth (based on my ’16 personal dollar values), so let’s assume our league mirrors those averages. In order to calculate inflation you need to find the remaining salary that can be spent at the auction, and the remaining dollar values left to spend that money on. Since ottoneu leagues have a $400 per team salary cap, the league would be expected to spend $4,800 total (for the purposes of this article I’m ignoring the fact that teams typically don’t spend all their money at auction). So if the average league had $3,252 in keeper salaries and $3,453 in keeper worth ($201 in league wide surplus), that leaves $1,548 ($4,800 less $3,252) in money to spend at auction on $1,347 worth of players. To find the inflation rate, simply divide the remaining salary to spend by the remaining worth, which in this case is $1,548/$1,347, or 1.149, which means this league has 14.9% inflation.

We have just calculated the auction inflation rate based on keepers, so we now know that at auction the league in aggregate will need to spend 14.9% more to acquire a player than they would in a league with no inflation (or a first year auction). Another way to express inflation is to represent the amount of value $1 will purchase at auction. If we take 1/1.149 (our inflation calculation from the last paragraph), we get approximately .87. That means that for every $1.00 spent at auction, $0.87 in value is expected to be purchased We can use that to adjust our dollar value sheet to properly account for inflation.

Making keeper decisions gets a bit more complicated when you try to account for inflation. Let’s say your league is two or three years old, and you expect there to be close to average inflation (15% or so for ottoneu FGPts leagues), should you keep a player with a $30 salary that you think is worth $28? Using a pure surplus strategy would suggest that the answer is no, but if we expect 15% inflation then that $28 player would be worth $32 at auction ($28*1.15), making that player look like a decent keeper after all. The implication for keeper decisions in leagues with inflation is that often it makes sense to keep a slightly overpaid player as long as that keeper premium is less than expected inflation.

There is a lot more that can be written about more advanced applications and strategies related to surplus and inflation in auction keeper leagues, so consider this just a ground level introduction. If you have any questions please feel free to leave a comment!