IPL player pricing: What makes Dhoni worth $1.5 mn?
Recenly came across this article in the Economic Times (http://economictimes.indiatimes.com/articleshow/4072970.cms)
To be honest, I did not quite understand how the valuations were arrived at. When you bundle simple concepts with confusing management jargon and incomprehensible mathematical formulae they seem sophisticated and are wothy of being called ‘a research paper’. But it doesn’t mean that everything that contains deltas and thetas and betas; and some filthy graphs is a well-researched article…
I am not too sure if Modi and Co. ( whole-and-sole of IPL auction) had thought of so many factors before attaching an initial price tag to the palyers being auctioned. And I am VERY SURE that the bigwigs participating in auction DEFINITELY had no backing of logic or mathematics when they bid for a player. So there is no point in ‘finding a method in this madness’…
A price any player fetched was purely based on combination of many things – hype, publicity, perception (of ‘experts’ and owners of IPL teams), recent performance (to some extent), popularity in India and just their ability to ‘surprise’ …all of these – but DEFINITELY NOT the
algorithm and sophisticated valuation techniques.
Some of the findings were as meaningless as valuation techniques e.g.
- An Indian player, on an average, fetches a premium of $203,156 over foreign players (so what? this might change next year – so what is the trend/ point in this?)
- A half century in any form of ICC approved match fetches $2683 (again what does this signify?)
- An increase in T20 batting average by 1 run fetches $4658
- One more stumping in any form of ICC approved match fetches $2596
- An additional wicket in any form of ICC approved match fetches $377
The last 3 are the most meaningless data points – for there aren’t enough T20 matches played yet – so such a number will always be high…once no. of T20 matches rises, corresponding averages would decrease.
I don’t know to what extent the IPL owners (the people who actually spend money) will value this analyses in future auctions – if at all they bother to read it.
But what I am interested in is opinion of the real expert person on this topic i.e. Harsha Bhogle – who is one of the most thoughful commentators and also an IIM alumni!
So let’s wait (and hope) that he has something to comment on this IPL auction and valuations…