Wednesday, August 23, 2006

Tradesports and Baseball

I figure that in my inaugural post I should give a hat tip to Greg Mankiw, who gave me the idea of integrating an economic commentary blog with the classes I teach for micro and macro economics. Therefore, I would like to extend his analysis of tradesports probabilities for the 2008 election, which you can view here. http://gregmankiw.blogspot.com/2006/08/potus-2008.html#links

Specifically, I would like to apply his conditional probability analysis towards baseball. According to trade sports the top 4 teams in each league who are expected to win the World Series are

World Series
1) NY Yankees 21.4
2) NY Mets - 14.3
3) Detroit Tigers - 12.4
4) Chicago White Sox - 9.5
5) St. Louis - 8.5

However, it would be incorrect to draw the inference that the Mets are the second best team in baseball because they play in a much weaker division and will thus have an easier time in the division/NLCS playoffs than other American teams that are better quality teams

Therefore, in order to calculate who the markets view as the best team we have to apply conditional probability based on the likelihood of winning the World Series conditioned on winning the pennant.

AL
1) NY Yankees 32.3
2) Detroit - 22
3) Chicago White Sox - 14
4) Oakland - 11.5

NL
1) NY Mets - 35.5
2) St. Louis - 21.2
3) LA Dodgers - 14.2
4) Reds - 8

As Mankiw did with the presidential probabilities, we divide the probability of winning the world series by the probability of winning the pennant and we get.

1)Chicago - 67.8
2)NY Yankees 66.3
3) Detroit 56.4
4) NY Mets 40.3
5) St. Louis - 40.1

We can thus see that the AL teams are more likely to win the World Series if they make it versus the NL team. Thus, any NL team that makes it to the World Series will be most likely viewed as underdogs.

2 comments:

Heywood970 said...

Hi Matt,

Just to say thanks for mentioning www.tradesports.com.

We appreciate it.

Bart K.

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