Abstract
The Indian Premier League (IPL), a professional Twenty20 cricket tournament, was launched in April 2008 by the Board of Control for Cricket in India (BCCI). Modelled along the lines of the National Basketball Association (NBA) of USA and the English Premier League of England, the IPL franchisee rights of the participating eight teams were sold through competitive bidding. Importantly, the franchisee team owners bid for the services of cricketers for a total of US$ 42 million. However, not much is known about the process of valuation of the cricketers' services. Given the data on final bid prices, cricketing attributes of the players, and other relevant information, this paper tries to understand which attributes seem to be important and what could be their relative valuations. It employs the bid and offer curve concept of hedonic price analysis and econometrically establish a relation between IPL-2008 final bid prices and the player attributes. Following are the major observations:
Non-cricketing attributes such as fame and popularity are rewarded with a very high premium; the premium depends upon the associated glamour or the controversy surrounding the player. Franchisee fixed effects in the final bid price of the players are significant for two teams — Kings XI Punjab and Mumbai Indians. On an average, Indian players command a premium of about US$ 2,57,557. Among the cricketing attributes, batting average in Twenty20, batting strike rate in One Day Internationals, and number of half-centuries, stumpings, and wickets taken in all forms of the game are important determinants of the final bid price. Increase in the batting average for Twenty20 matches by a run raises the final bid price by US$ 5,430. Increase in the One Day International batting strike rate by a run raises the final bid price by US$ 4,709. An additional half-century, an additional stumping, and an additional wicket taken in any form of the game raises the final bid price by US$ 2,762, US$ 2,767, and US$ 335 respectively. Ceteris paribus, a player loses out US$ 28,518 in the final bid price by being older by a year relative to other players. No significant premium is attached to assigning an ICON status to a player.
With the commencement of the second IPL season, it is hoped that the analysis carried out in this study would facilitate a better understanding of the player price formation and underscore the predictive value of such data-driven analysis. The study can also be used to create a payment benchmark in other forms of the game such as Test Cricket, and could be extended to other sports as well.