Tuesday, March 28, 2006

A better March Madness pool

A friend, Doug Cutchins (co-author of this book), and I have created an auction-style pool for the NCAA men's basketball tournament. We enjoy the format and invite others to follow along. Update--from here to the end of the paragraph added. In keeping with the theme of this blog, I'll emphasize the underlying logic of the idea: most tournament pools simply reward correct picks. Some recognize the limitations of that model and reward upsets. Both of those approaches lead to insincere picks by rewarding contrarianism; if you want to win the pool, you can't simply make sensible choices and fill out your bracket. A market captures the advantages of rewarding upset picks while avoiding the incentive for insincerity. If everyone in the pool thinks St. Bonaventure will win the championship, they can all bid accordingly, according to their sense of the Bonnies' probability of winning in each round, and the market will determine how much the team's output is worth. Upset picks are rewarded automatically because underdogs command lower prices than favorites--and the underdog/favorite distinction is determined by participants rather than the selection committee.

As with all pools, it is not necessary to wager real money to enjoy the competition. Here's the way we announced the pool, slightly revised for this general context:

We like basketball, but we have tired of the standard pool format—its blunt all-or-nothing payouts, its overweighting of the final games, its inability to let participants express their degree of confidence in teams beyond simple brackets.

We think we have a better way. We propose an auction, to take place at 7:30 p.m. on March 14th (the Tuesday between the announcement of the brackets and the tourney) at a location yet to be determined. In the auction, taking eight participants by way of example, eight participants each buy “ownership” of eight tournament teams with a fictional budget of $25 each, so every basketball team is on one of our participants’ teams. (The winner of the play-in game would count as one team.) The teams are bought in a standard auction format, with rising bids in ten-cent increments, so players express their confidence in each team’s prospects with their bids. Then each player gets credit for each game his or her teams win. We believe that wins should increase in value in each round of the tournament, though not so much that they cheapen clever picks in the first two rounds. To that effect—after many drafts—we have come up with this payout scheme:

Each of 32 first-round winners earns 1.25% of the pot ($2.50 in an eight-person league)
Each of 16 second-round winners earns an additional 1.50% ($3.00)
Each of 8 third-round winners earns an additional 2.00% ($4.00)
Each of 4 fourth-round winners earns an additional 2.50% ($5.00)
Each of 2 fifth-round winners earns an additional 3.00% ($6.00)
The tournament champion earns an additional 4.00% ($8.00)

It’s up to each player to decide how much of his or her $25.00 to bid on each team. In an eight-person league, the tournament champion would earn its owner $28.50 (14.25% of the pot), in addition to any winnings generated by the player’s other seven teams.

We like this system because, unlike most common approaches, it allows players real flexibility in pursuing overall strategies, making trade-offs between, say, a #1 seed or two #3 seeds. It lets the little market of the auction determine the relative costs of teams instead of relying on the rankings of the committee. It lets participants enjoy a strong sense of identification with eight specific teams instead of the traditional 64 picks, most of which are widely shared with other players. It creates payouts that reflect players’ performance with some subtlety; prizes will spread out rather than simply going to the luckiest player or players. And best of all, it lets us enjoy a late-evening time of sports banter and good cheer to raise our spirits before the tourney tips off.

The details:

1. Each player has the right to spend $25 of fictional money in the auction. The player may spend less than 25 imaginary dollars in the auction, but the 25 real dollars will remain in the pot.

2. The auction will proceed in a steady rotation, with players putting teams up for bid in turn. The nomination constitutes an opening bid, as in “St. Bonaventure for two dollars!” All bids must meet two conditions: the player must have space on his or her eight-team roster for a team (players who have drafted eight teams will no longer nominate teams in the auction), and the player must reserve enough money to make a minimum bid of ten cents on each of eight teams. If St. Bonaventure is nominated first, for example, everyone would be able to bid up to $24.30, the amount necessary to buy St. Bonaventure and seven teams at the minimum price of ten cents. Also, skip bids are fine; if someone nominates St. Bonaventure for two dollars to start the auction and you want to bid $24.30 right away to ensure control of the Bonnies, you are welcome to do so.

3. As bidding slows down on each team, someone will count down the sale clearly, as in “St. Bonaventure to Erik for $8.60, going once . . . going twice . . . sold!” The count should give all bidders reasonable time to pipe up. Players may occasionally interrupt the countdown by asking for brief time-outs, but this privilege should not be abused, lest the abuser be subject to taunts, scorn, and mockery.

4. The statkeeper will send out an update with standings and commentary every round.


Dan said...

Did you do it? How has it worked out so far? I'll look forward to a recap after the tournament if you put this idea into action.

Erik_Simpson said...

Yes! It's ben great fun--for me, at least, vastly more interesting than the standard pick-your-bracket pool. Admittedly, part of the fun has been that I've done really well by lucking into ownership of UCLA and Florida, but I think everyone has enjoyed the format.