Managing Risk in FML

A very interesting thread on the forums in the past few days started by a guy called Ackter.

Ackter's dilemma - as it shall henceforth be known (!) - was the following... he had a youth whose wage demand had shot up from 1.2k to 6k, and wasn't sure whether or not to auto-extend at that rate or risk a wage auction. This is a dilemma that a lot of managers are going to face in the coming seasons! In the end - since the player wasn't yet really good enough for the first team football he had been getting - Ackter risked a wage auction with a max bid of 3k. But he was overbid by someone else who entered 7.5k, and so the player left with Ackter only receiving 16k compensation from the AQ fee. Ackter's argument is that he should have received more, perhaps with a rate set in a similar manner to the way the tribunal system works in real life. He mentioned the figure of 100k ish plus sell on clause perhaps being reasonable in this case. This prompted an interesting and passionate debate about whether the system should change, but I don't want to comment on that here...

Instead, I want to look at strategy within the current system and ask how could Ackter have managed his risk? Basically in the situation he was in he had three options:
1 - Hold his nose and pay the auto-extend rate.
2 - Let it go to wage auction as he did.
3 - Before the player's contract expired put him in a transfer auction.
I want to explore option 3 some more.

Now lots of people don't like using the transfer auction route because they say it guarantees they'll lose the player, whereas in a wage auction they still have a chance of keeping him. And of course it's true that just before the wage auction period can be the worst time to put a player in transfer auction, since prices come down a bit with other managers waiting for wage auctions.

But I want to suggest that a transfer auction can be a great way of testing the waters before a possible wage auction. Take Ackter's case. He knew that he was only willing to bid a maximum of 3k for this player in wage auction. So he would know that a bid of 3.1k would see him lose the player for just 16k compensation. Now someone making a bid of 3.1k for this player would end up paying the 16k AF plus a 31k signing on fee (3.1k x 10) for a total of 47k. Of course Ackter only sees 16k of this money.

So what if Ackter had put the player in a transfer auction with a starting bid of 50k, perhaps throwing in a 10% sell-on clause for good measure? If no-one bid, Ackter could be reasonably confident that no-one was willing to bid more than 3k for the player in wage auction, and could go on to risk it. If somebody bid over 50k then yes Ackter would lose the player - but if this happened he was going to lose the player in wage auction anyway! The difference now is that all of the 50k comes to him, rather than most of it flowing out of the system as a signing on fee. And of course he's got his sell on clause. And there's a chance that multiple managers will bid, and drive up the price, giving him more compensation.

Of course this isn't a risk free system. It assumes that all interested managers see the transfer auction, and furthermore that managers actually sit down and make a calculation about whether a player will be cheaper to sign in transfer or wage auction - not all FML managers are that rational!! But I think it's a reasonable way of managing your risk in these sorts of situations.