Is this perceived 'market value' notion flawed?

Shaquille Oatmeal

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Jun 30, 2015
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All I can say is Chiarelli ruined market value for RHD via trade eh Larsson and for F RFA’s like Draisaitl.

Yep. The Oilers ruined the RFA market, the trade market and the lottery system.
Quite the operation they run out there.
Problem solved. Oilers never overpay again.
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Lunatik

Normal is an illusion.
Oct 12, 2012
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No, market value is what a team is willing to pay. It's literally that simple.

Real life example: I just went on Zillow and in about 30 seconds found a 6488 square foot house in Flint MI for sale at $469,000. Gorgeous house that's on the verge of being a legit mansion. After I wrote that last sentence, I changed the location to NYC and entered the same square footage. To get 6-7000 square feet on Staten Island, you'll drop $2-4,000,000. That's nearly 10 times the price for basically the same house. Why? Because nobody wants to buy a house at any price in Flint MI. It doesn't matter how nice the house is, because there's no market for anyone to buy a house. So the market price for anything, regardless of how nice, is peanuts compared to what it would be in a place where people are scooping up anything they can find. That is what market value means.

Back to hockey: If there were 300 players as good as Zach Hyman on the market, he would be lucky to get a minimum level contract. There are only so many roster spots to go around, and there's a good chance that most of those Hyman-level players would be in the AHL or Europe before it was all over. So a GM has absolutely no reason to over-bid for one of them. If Hyman won't take $600K, move on to the next Hyman type guy who will take it. $600K is Hyman's market value.

But if there are only 2 players as good as Hyman on the market, then suddenly there's a massive competition for his services. GMs have the job of making their team better, and 29 of them are in a position to miss out completely on the opportunity. So even if some of those 29 are willing to just walk away and look at other options (trade, development), if even 5 of them are interested in those 2 players, now you have a "race to the top" of the salary scale to see who is willing to overpay the most in order to avoid losing the race. Hyman ends up making $5 million because at least one of those GMs is willing to pay it. $5 million is Hyman's market value.

This can create some really weird dynamics. Say there are 3 good goalies on the market and only 2 teams needing a goalie. There's a strong likelihood that the team with the most money to burn will overpay in order to get the best goalie in that group, even if he's only the best by a little... say that guy gets $5 million. The second team now has their choice of 2 goalies and no real difference between them, so they can afford to sit back and make lowball offers. Whichever goalie is more desperate to have a job will take the lowball offer... say $2 million. The third guy is now out of a job completely and will either take a $1 million backup contract or leave for Europe.

That's more or less what happened with goalies this season. Look at the contracts signed by these guys, who are basically on a level with each other:

July 1:
Jonathan Bernier - $3 million
Cam Ward - $3 million
Jaro Halak - $2.75 million
Carter Hutton - $2.75 million
Anton Khudobin - $2.5 million

So the market value of a low-level starter/high-level backup goalie is $2.5M-$3M, yes?

But look what happens two days later:

July 3:
Robin Lehner - $1.5 million

Why was Lehner's market value literally half what his peers made 2 days earlier? Because by the time he signed his contract, almost everyone had signed their goalies already and there was nobody interested in spending lots of money on one. So Lehner, who is every bit as good as Bernier and Ward, will make half their salary.

Conclusion: Market value is nothing more than what a GM is willing to pay for that player at that moment, and their willingness to pay is driven by supply and demand.
Great post THH
 

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