Fangraphs has a figure that (for those who care about sabermetrics) tells quite a tale. As the picture to the right, and associated analyses, makes clear, fans of a team generally project that the individual players will perform better than they actually do. Overall, the community of fans was “in the middle of the pack compared to other projection systems,” and so the result isn’t simply a function of noise or foolishness. This finding is a nice observational data correlate of a very old & famous social psychology experiment – They Saw a Game: A Case Study, by Hastorf and Cantril. In that experiment, observers’ experience of the refereeing of a game was biased by their fandom — we see fouls when the other team commits them.
It would be interesting to see if baseball professionals – scouts, GMS, etc. – exhibit the same effect. That kind of motivated reasoning isn’t exactly the premise of Moneyball – which argued that teams were blinded by tools, not self-serving bias. But it provides an alternative explanation for why teams overpay to retain their own players — they believe they will do better than the market does. This analysis, of course, can be extended to firms at large. Though many analyses of executive compensation focus on managerial capture, there’s another story: the owners and directors of the firm are fans, and consequently mispredict its future.
Of course, none of this analysis at all explains why the Washington Nationals overpaid for Jayson Werth. Or why Cliff Lee rejected two higher offers to live in Center City Philadelphia. Some results are just magical.