There's a lot of strong dynasty analysis out there, especially when compared to five or ten years ago. But most of it is so dang practical—Player X is undervalued, Player Y's workload is troubling, the market at this position is irrational, and take this specific action to win your league. Dynasty, in Theory is meant as a corrective, offering insights and takeaways into the strategic and structural nature of the game that might not lead to an immediate benefit but which should help us become better players over time.

Another Reason Why Trading is Hard

Today I want to write about something that seems like a puzzle but isn't.

Let's imagine we have two players who we value roughly identically. Let's say Jahmyr Gibbs and Bijan Robinson. They're both 23-year-old backs, both taken high in the same draft class, both proven, both talented, both projected as Top 5 running backs the rest of the way. Reasonable managers could easily prefer one or the other without raising any eyebrows.

According to Dan Hindery's most recent trade values, there's just a 6% difference between the two RBs in value. Over at Fantasycalc, that's just 2.3%. At KeepTradeCut, it's a difference of only 1.5%. The margins between the two players are quite thin.

If I had Bijan Robinson and a leaguemate offered me Jahmyr Gibbs for him, I would turn them down. That seems reasonable. But if I had Jahmyr Gibbs and a leaguemate offered me Bijan Robinson for him, I'd turn them down, too.

What gives? Shouldn't I prefer one or the other? Is this another example of Harstad being wishy-washy and refusing to take a position on a subject? For once, it's not! Instead, this is an illustration of something called the bid-ask spread.

What is the Bid-Ask Spread?

The purpose of a market is to match buyers with sellers. At any given point, buyers have a price they're willing to pay to acquire something (the bid). At the same time, sellers have a price they're willing to accept to let it go (the ask). When the gap between the bid and the ask is small, a market is said to be very liquid, meaning it's easy to pair buyers and sellers. Picture a hot real estate market where houses are only available for a few weeks before finding a buyer.

When the gap between the bid and the ask is quite large, the market is illiquid, and inventory sits for long periods with no one to buy it. Picture a tepid real estate market where prevailing prices have fallen, but current homeowners aren't yet accepting of that reality, resulting in homes that sit for months or even years without a buyer.

Typically, the bid-ask spread refers to situations where the buyer and the seller are separate, but we all have our own personal bid-ask spreads, too. There's a price I would be willing to pay to acquire Jahmyr Gibbs. There's a price I'd be willing to accept to part with him. The first price is invariably lower than the second, and that's the case for every other player in the NFL, too.

(If you want to get nerdy about it, this isn't actually a bid-ask spread; it's a gap between willingness to pay, or WTP, and willingness to accept, or WTA. But I find that people understand the idea of a "bid-ask spread" more easily, and while I love gazing at navels as much as anyone, the primary purpose of language is communication, so I will continue to use bid-ask spread.)

Why is this? There are lots of reasons, but today I want to look at three—one bad and two good.

Reason #1: The Endowment Effect

The endowment effect is the psychological tendency to value something we possess higher merely because we possess it. The classic demonstration involves offering students two items which they value roughly equivalently—in the original experiment, a pen and a mug. When both are freely offered, the students tend to take both at equal rates. If you instead give the students a mug and offer the opportunity to trade it for a pen, the rate of students taking the pen plummets. Once the mug is theirs, they start to assign additional value to it.

This is quite a bad reason for the bid-ask spread. The fact that a player is on your roster doesn't actually make him any more valuable; if the goal is maximizing long-term wins, this is an inefficiency which should be addressed.

Reason #2: Loss Aversion