RM Presentation IPL

8/6/2019 RM Presentation IPL

1/27

S I D D H A R T H A K . R A S T O G IS A T I SH Y . D E O D H A R

I N D I A N I N S T I T U T E O F M A N A G E M E N T , A H M E D A B A D

PLAYER PRICING AND VALUATION OF

CRICKETING ATTRIBUTES:

EXPLORING THE IPL TWENTY-TWENTY VISION

Presented By:

VINEETH.K


2/27

ABSTRACT

In April 2008, BCCI initiated Indian Premier League, a crickettournament of Twenty-Twenty overs to be played among eightdomestic teams.

Team owners bid for the services of cricketers for a total of US$ 42million.

Researchers here try to understand which attributes seem to beimportant and what could be their relative valuations.

Employing the bid and offer curve concept of hedonic price analysisand econometrically establish a relation between the IPL-2008 finalbid prices and the player attributes.

Number of half centuries, number of wickets taken, and number ofstumpings in all four forms of the game, batting average in thetwenty-twenty form of the game, batting strike rate (ODI), age,nationality, iconic status, and non-cricketing fame seem to be the

critical attributes in the valuation of players.


3/27

INTRODUCTION

The Indian Premier League (IPL) made its debut in Indiain April 2008.

IPL is a tournament modeled on the lines of National

Basketball Association (NBA) of USA and the EnglishPremier League of England.

IPL is a professional Twenty-Twenty cricket league,launched by Board for Control of Cricket in India (BCCI)and has the backing of International Cricket Council

(ICC). The tournament is played among eight teams, where

twenty overs are bowled by each team in any givenmatch.


4/27

INTRODUCTION

The eight teams represent eight different cities of India,the franchisee rights of which are auctioned-off for tenyears to successful bidders.

The first round of the tournament is played on a doubleround-robin basis, where each team plays the otherseven teams at home and away.

The top four teams play the two semi-finals, followed by

a final at the end. Thus, the tournament involves a total of 59 matches of

twenty-twenty overs each, to be played among eightteams.


5/27

INTRODUCTION

While eleven players take the field in a match, each teammaintains at least sixteen players.

Five of the teams have a designated icon players

belonging to the regions , who is paid an amount fifteenpercent higher than the highest paid player in that team.

The principal behind icon players is that an iconic playerfrom the vicinity of home city would be able to generatekeen interest in the team and for the tournament.

The icon players and their teams are Virender Sehwagfor Delhi, Sourav Ganguly for Kolkata, Rahul Dravid forBangalore, Yuvraj Singh for Punjab, and SachinTendulkar for Mumbai.


6/27

INTRODUCTION

For every team, there is a catchment area defined as perthe geographical location of the city they represent.

The team must have at least four players from their

respective catchment area and four Under-22 players. Each team can buy a maximum of eight overseas

players; however, only four would take the field in amatch.

Given the above ground rules, the franchisee ownersformed their teams by participating in an auction of thecricket players organized by the IPL authorities.


7/27

INTRODUCTION

The prices received by the players varied quitesignificantly.

For example :- Mahendra Singn Dhoni toped the list

with a price of Rs. six crores then, and at the other end,players like Dominic Thornely received Rs. Ten lakhs.

How are the bidding prices decided?

What cricketing attributes and other factors are

implicitly decisive in the final bid prices? Among these attributes, which are valued more than the

others?


8/27

LITERATURE REVIEW

There have been several studies on players compensation invarious sports.

Estenson (1994), MacDonald and Reynolds (1994), and Bennett andFlueck (1983) have studied player compensation in baseball.

Dobson and Goddard (1998) and Kahn (1992) have consideredcompensation issues in football.

There are also related studies in ice-hockey (Jones andWalsh, 1988)and basketball (Berri, 1999, and Hausman and Leonard, 1997).

In cricket, there are a few studies which deal with scheduling thecricket matches (Armstrong andWillis, 1993;Wright, 1994; andWillis and Terrill, 1994).

Barr and Kantor (2004) sought to determine the importantcharacteristics for a batsman in one-day cricket.

However, there are no studies which links compensation to playerattributes.


9/27

METHODOLOGY

The method used in measuring valuation of (cricketing) attributesleading to the formation of player price is Hedonic Price Analysis .

Hedonic Price Analysis is based on the hypothesis that agood/service can be treated as a collection of attributes that

differentiates it from other goods/services. Waugh (1928) propounded this concept based on his observation of

different prices for different lots of vegetables.

Waugh sought to identify the quality traits influencing daily marketprices.

Later, Rosen (1974) based his model of product differentiation onthe hypothesis that goods are valued for their utility generatingattributes.

According to him, while making a purchase decision, consumersevaluate product quality attributes, and pay the sum of implicitprices for each quality attribute, which is reflected in observedmarket price.


10/27

METHODOLOGY

Extending the analogy to cricket, a cricket player isvalued for his on-the-field (and perhaps, off-the-field)performance.

We propose that a cricket player sells his cricketingservices for the IPL tournament.

The franchisee owners bid for the player services, forteam owners would like to maximize their utility

(chances of winning and maximizing profit), and, playerperformance is an important arguments of their utilityfunction.


11/27

METHODOLOGY

The final bid price of a player must be a function of thevaluation of winning attributes of a player.

Therefore, given the data on values of various attributes of

cricket players and their final bid prices, one can estimate thefollowing hedonic price equation econometrically,

Pi = g ( zi1, ,zij, , zin),

where Pi is the final bid price paid to a cricketer i for the IPLtournament and zij is the value of the attribute j of the cricket

player i. The hedonic price equation, in this context, is a locusof equilibrium final bid prices and player attributes, wherebuyers (team owners) and sellers (cricket players) participatein an auction.


12/27

DATA AND REGRESSIONS RESULTS

The data sources include the offical website of IPL andtwo other websites, Cricinfo andWikipedia.

The bidding process involved 99 players; however, data

is available only for 96 players. the final bidding price is considered as the dependent

variable

The independent variables were divided into two sets

Dummy variables identifying qualitative attributes and Measurable variables based on past statistics of the

cricketing attributes.


13/27


Considered various forms of regressions equations suchas double log, log-linear, linear-log and the linearregression, and experimented with the comprehensive

data at hand. For all the functional forms of the regression equation,

highly correlated variables and variables with low t-statistics, were progressively eliminated

Selected ones that provided higher values of R-squareand adjusted R-square.

The best fit among all the functional forms was the linearregression equation.


14/27

LINEAR REGRESSION EQUATION


15/27

Description of Variables


16/27


Icon players may garner local/regional support for reasonsother than their cricketing attributes. The dummy variablesMicon and Icon control for such non-cricketing attributes.

They capture the iconic value of the player to the teamowners.

There are two non-icon players who crossed the US$ 1 millionprice tag.

One is Mahendra Singh Dhoni, very much liked by Indiansfor his personal charisma.

The other is Andrew Symonds, famous for the controversiesarising out of his racial background.

Both players are big crowd pullers and the dummy variableExicon captures the fame value of these players to the teamowners.


17/27


The dummy variable, Countryj is introduced to gauge thepremium players may receive for being Indian vis--vis theforeign players.

Since the Australian team has been a top ranked team for anumber of years, we considered it as the base dummy.

Very few players from Bangladesh, England, Zimbabwe, andWest Indies participated in the player auction, therefore, weput them all together in the country dummy, Other.

A few other dummy variables were also considered, such asbatting hand, bowling hand, and bowling style,

But these variables turned out to be statistically veryinsignificant, removing these dummies improved thegoodness of fit of the regression equation considerably.


18/27


The other set of independent variables are the measurablevariables based on past statistics of the cricketing attributes.

The other set of independent variables are the measurable

variables based on past statistics of the cricketing attributes. For example, batting related statistics includes variables such

as runs scored, batting average, batting strike rate, number ofcenturies, and number of half centuries.

Similarly, bowling related statistics includes variables such as

number of wickets taken, bowling average, bowling economyrate, and bowling strike rate.

The other important variables include number of stumpings,number of catches taken, and age.


19/27


Of the numerous statistics/variables mentioned above,the ones that best satisfy the goodness of fit criteria interms of t-statistics, R2, adjusted R2 and the f-statistics forvarious forms of regression equations were considered.

These variables include: Batting average in twenty-twenty international matches

Total number of half-centuries scored in all four forms ofcricket

Batting strike-rate in one-day international matches Age of the player in completed years

Total number of stumpings in all forms of cricket

Total number of wickets taken in all forms of cricket.


20/27

Regression Results


21/27

INTERPRETATION

The parameter estimate of $499,037 for the variable miconreflects the premium Sachin Tendulkar, Saurav Ganguli,Rahul dravid, and Yuvaraj Singh earn for their regional iconicpopularity.

Another icon player, Virender Sehawag, enjoys an iconicpremium of only us$ 382,274.

The premium for two other players, though not having iconicstatus but who received a final bid price of more than us$ 1

million is $794,580. Having controlled for the cricketing attributes, this high

premium seems to be a reflection of their ability to draw hugecrowds nationally due to their charismatic nature and racialcontroversies surrounding them respectively.


22/27

INTERPRETATION

Thus, out of the total price of $1.5 million and $1.12million received by mahendra singh dhoni and sachintendulkar

The value of their cricketing attributes is $705,420 and$622,213 respectively.

Their net crowd pulling business value is about $794,580and $499,037 respectively.


23/27

INTERPRETATION

Does an Indian player command a premium over foreignplayers?

The answer is, Yes.

Among the foreign players, none receives any premiumfor their nationality, however, an Indian player, on anaverage, controlling for other attributes, is likely toreceive a premium of US$ 203,156 over non-Indian

players.


24/27

INTERPRETATION

Role of age in the final bid prices.

Regular participation in games as well as biologicalaging is likely to make a person less fit progressively.

Implicitly, this may get reflected in the final bid prices. The coefficient for age is found to be negative and

statistically significant.

On an average, a player loses out US$ 29,484 for getting

older by one more year. Thus, premium for being younger in a twenty-twenty

IPL tournament is well established in this study.


25/27


26/27

INTERPRETATION

The only bowling related variable that finds importance

in the player pricing is the total number of wickets takenin all forms of the game.

. Every additional wicket taken earns a player us$ 377.

This should not come as a surprise, for the twenty-

twenty form of game seems to be dominated bybatsmen.


27/27

Documents

RM Presentation IPL