IPL auction: Indian players are more conservative in setting reserve prices
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This weekend’s auction for the Indian Premier League (IPL) should have been a major one, with a large number of places being up for grabs. However, the IPL council decided to award four-year contracts to players after the 2014 auction (compared to the three-year contracts awarded after the major auctions in 2008 and 2011). The major auction scheduled for 2018 will coincide with the return of Chennai Super Kings and Rajasthan Royals, banned from the tournament for two years following match-fixing allegations.
Still, the weekend’s auction is no small matter. The eight participating teams have a total of Rs143 crore available to spend at the auction, which is more than one-fourth their total salary budget (the total salary payable by a team to its players is capped at Rs66 crore a year). They can use this money to buy up to 76 players (each team can have a squad consisting of up to 27 players).
According to ESPNCricinfo, 799 players signed up to participate in the auctions, more than half of whom failed to elicit interest from any of the eight teams. The remaining 351 players will be going under the hammer in Saturday’s auction; 226 are Indian.
Not all teams will participate to an equal extent in Saturday’s auction. The most active participant is expected to be Kolkata Knight Riders which released 13 players from its squad after last season. Kings XI Punjab has the largest remaining budget at Rs23.35 crore using which it can buy only eight players. However, since that team has shown a historical tendency of not maxing out the salary cap, it is unlikely that it will bid too aggressively. Royal Challengers Bangalore and Mumbai Indians have the least spending capacity among all teams but need only seven players each.
Squad formation for a tournament such as IPL is a complex optimization problem. Not only are there multiple constraints (salary cap, squad size and number of foreigners in squad), but the value of a particular player is also rather uncertain (while we can derive metrics based on historical data, things such as form and “fit” with the team are hard to measure). Then, the sequential nature of the auction means that teams need to build their squads in an “online” manner, updating their preferences and strategies after each player is auctioned.
The result of all this is that IPL auctions can be rather wild and irrational, with some players receiving far in excess of what their potential contributions deserve and others getting short-changed. Apart from resulting in a high variability of income for a registered player, this also implies that predicting the “big winners” at such an auction is not an easy task.
From the players’ point of view, all they can do is to set an appropriate reserve price for the auction, and hope that at least one team is able to meet that. There is a very interesting pattern in the way in which players who were part of last year’s IPL have set their reserve prices.
The IPL has a system where salaries of players released by their franchises before the completion of their contracts are guaranteed by the league (teams contribute to a fund that pays for this guarantee). This way, a released player does not face financial losses by not playing in subsequent seasons.
Consequently, the reserve prices that released players set for themselves in subsequent auctions can be seen as an indicator of their desperation to play—a player who is more desperate to play sets a lower reserve price to maximize his chances of being picked in the auction. A less desperate player can set his price higher, since his income is anyway guaranteed from the earlier contract.
Foreign players released by their franchises following last year’s edition have set their reserve prices significantly higher than Indian players similarly released.
For example, Eoin Morgan and Mitchell Johnson, released by Sunrisers Hyderabad and Kings XI Punjab respectively, have set their reserve prices at Rs2 crore, the highest possible reserve price. Three more foreign players released by their respective franchises—Trent Boult, Kyle Abbott and Jason Holder—have set their reserve prices at Rs1.5 crore.
Indian players have been far more conservative in setting their reserve prices, indicating a greater desperation to play the IPL. The only Indian to set his reserve price above Rs50 lakh is fast bowler Ishant Sharma, who has set his reserve price at Rs2 crore. It must be pointed out that Sharma is not a regular in the 20-overs format, either for India or for any of the IPL franchises he has played for.
Barring Sharma and all-rounder Irfan Pathan, all other Indian players who were released after last season have set their reserve prices at Rs30 lakh. Even Pawan Negi, who was paid Rs8.5 crore last season, has kept his reserve price at Rs30 lakh, indicating the importance of playing in the IPL for Indian players.