Jeff Karstens and Imperfect Information

Jeff Karstens‘s free agent case was, to me, one of the most intriguing of the offseason. I covered it multiple times at multiple outlets. I thought the Pirates’ decision to non-tender Karstens was curious — the club has little starter depth beyond A.J. Burnett, James McDonald and Wandy Rodriguez; Phil Irwin was the fifth best starter in the organization according to ZiPS, including minors-bound first overall pick Gerrit Cole. Things only looked worse following the Francisco Liriano debacle — his two-year, $14 million contract remains on hold, in the same limbo as Mike Napoli’s would-be deal with Boston.

Although I understood why Pittsburgh might not want to take the risk on Karstens — he has dealt with regular injuries and has never thrown more than 162.2 innings in a season. Given a likely budget crunch, it’s easy to see how Pittsburgh might be better served with a sure thing. But I thought Karstens and his 3.59 ERA and 3.94 FIP since 2010 (49 appearances, 41 starts) could be an intriguing value play for which a team would pay at least $5 million — meaning, considering the non-tender, Karstens wouldn’t return to Pittsburgh.

Tuesday, Karstens reportedly signed a $2.5 million contract with the Pirates. I was wrong on both counts of my prediction, a good reminder of the imperfect information available to those of us who try to foresee these things from outside MLB organizations.

The concept of perfect information is key to the evaluation and modeling of games. In game theory, a game of perfect information is one in which all players have all the relevant information necessary to decide future moves. Obviously, this is not the case with the free agent market in baseball. Teams get different information from their scouts and the information learned from employing a player seems to be signficantly useful. Similarly, those predicting these moves from the outside are privy to even less information (which is maybe why it’s smarter to stay out of it, but I haven’t learned yet apparently).

The first indication the Pirates were considering non-tendering Karstens came back in October, when general manager Neal Huntington publicly questioned the righty’s durability:

“He’s doing everything he can to get the best out of his abilities,” Huntington said. “Unfortunately at times, his body lets him down, and it’s been various body parts.”

So obviously the Pirates had questions about his durability — possibly even beyond Karstens’s injuries to date — issues the entire league were privy to following Huntington’s quote. But were these questions based on issues surrounding the hip flexor injury which placed Karstens on the DL in September? Or the shoulder soreness which sidelined him from April to June? Was it just a matter of his constant nagging injuries and the idea that his past injuries would lead to more future injuries? Or was it something deeper in the ideas of the coaching and training staff — something other teams may not pick up or could ignore in their process of gathering information?

All this ambiguity and the constant demand for starting pitching — even lottery ticket, back-end material like Karstens — convinced me Karstens would find suitors outside of Pittsburgh. Not only didn’t he find other teams willing to sign him, he even took a pay cut — down from $3.1 million in 2012 to $2.5 million in 2013, and he earned far less than the $3.8 million Matt Swartz projected he would earn in arbitration this season at MLBTradeRumors.com.

It would be easy to point to Huntington’s quote as the obvious signal of an imploded market for Karstens, but Carlos Villanueva was regarded similarly by Alex Anthopolous before hitting the free agent market this season, and he got $10 million over two seasons. When asked about Villanueva’s ability to start, Anthopolous said:

“I don’t want to use a term that’s derogatory to the player,” he said. “I don’t want to doubt him. But I have to also be objective and realistic too.”

Villanueva received a two-year, $10 million from the Chicago Cubs to start this season.

So what does all this say about information (in the game theory sense) in the MLB free agent market? To me, the contract Villanueva signed with the Cubs tells us a bit, but not enough for me to believe wholeheartedly in his ability to start. It only takes one team with imperfect information — perhaps missing one of the most important signals — to earn a contract.

In Karstens’s case, on the other hand, the string of decisions made by general managers leading up to Karstens’s eventual $2.5 million contract with the Pirates speaks volumes. The information contained in the results — Karstens’s 2.5 WAR in the past two years and his strong strikeout and walk rates in particular — suggested he should be able to accrue $3.8 million worth of value to a team even if he’s limited to 90 or 100 innings. To see all 30 teams pass on giving him that value to the point where the Pirates — a team which we already know doubts Karstens — end up re-signing him suggests a wide variety of information gathering processes ended up spitting out the idea that Karstens wasn’t worth the value I pegged him at.

I wrote in November:

Part of Karstens’s improvement was a drop to a 7.8 percent HR/FB, his lowest since 2009. But looking at Karstens’s last two seasons, he owns a 3.59 ERA and a 3.94 FIP with a 10.2 percent HR/FB, indistinguishable from his career average. That comes out to a 96 ERA- and a 105 FIP- — in effect, Karstens has been a league average pitcher for 250 innings, and in this market, 100 innings of league average pitching is likely to be worth about $5 million, if not a bit more.

Of my two-part belief — Karstens is roughly an average pitcher, and Karstens is relatively likely to pitch 100 innings — one of those parts must be somewhat significantly out of line with the beliefs of the 30 MLB front offices. And, as much as I trust the analytic tools available to analysts like myself, it would be wrong not to consider this new information when reevaluating this year’s prediction.

The reevaluation: Karstens remains a possible bargain for the Pirates, and I doubt they regret spending the $2.5 million given the issues with Francisco Liriano’s contract and the dregs available on the free agent market. However, the 30-year-old’s health issues appear to be serious enough to the point where getting even half a season’s worth of starts is not even considered a likelihood, and his results perhaps cannot be expected to match his decent 2011 and 2012. Karstens should be a worthy investment, but now likely not the potentially difference-making value I expected earlier in the offseason.