Lessons in Economics from the IPL auction
₹24.75 crore. What explains this? First, Starc is a great T20 bowler, who has taken 170 wickets in the 121 T20 appearances at an average of 19.5 per wicket and an economy rate of 7.5 runs per over. Second, he will be playing IPL after eight years, bringing a certain novelty to the tournament and the team that he will play for.
Also, his 121 T20 appearances aren’t much given that he played his first T20 match in December 2009. So, he isn’t really jaded playing T20 cricket. Or as the film writer Salim Khan once said, “You get paid for saying no".
The trouble is every team had this information on him and more. Which is why they went hard for him. Delhi Capitals, Mumbai Indians, Kolkata Knight Riders and Gujarat Titans, all bid for him, until Knight Riders finally got him.
What does this tell us? More than information being at the heart of economic decision making, economic decisions impart information. Like in this case, four teams wanted Starc as a part of their plan. They really believe he can be a gamechanger.
Let’s now take the case of Pat Cummins, the captain of Australia’s men’s team, who was bought for ₹20.5 crore by Sunrisers Hyderabad. Cummins has played 128 T20 matches and taken 143 wickets at an average of 26.7 per wicket and an economy rate of nearly 8 runs per over. These figures tell us that Cummins is a decent T20 bowler but nowhere near the calibre of Starc in this format of the game.
So, what explains the high price he was sold at? He has had a particularly successful year captaining the Australian men’s cricket team which won both the 50-overs ODI World Cup and the World Test Championship. So, teams vying for him were basically looking at him to captain the team and were willing to pay a high price. This
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