It is something I have known and written about in the past, but finally a major publication has gone into detail on what the author calls "The Winner's Curse." (http://www.foxsports.com/mlb/just-a-bit-outside/story/mob-baseball-salary-inflation-free-agents-122514)
Lewie Pollis of FoxSports presents
the theory for the rise in player salaries which is tied to how teams view their own talent against the rest of the league. Pollis argues that in free agency, the winning bidder for
each free agent generally has the most optimistic view of that players’
likely future output and almost always outbids every other team,
the overall spending environment is likely to overstate the actual
number wins available for purchase in the market. In large part, says
Pollis, the issue boils down to the fact that clubs overrate their own
informational and analytical advantages against the rest of the league.
Likewise, I believe that most organizations fall in love with their prospects to the point where they overvalue them to the point of paralysis. High expectation and high ceiling prospects tend to kept longer in the system to the point where their asset value plummets to zero. Nothing hurts a club more than holding on to a player beyond his prime or potential.
