Tuesday, September 8, 2009

The Kessel Situation, Part 2

We were rather lazy in creating our last post, so another whirl:

Let us say that the Boston Bruins' chances of winning the Stanley Cup this season are some number a, with Phil Kessel on the roster, along with all the other Bruins' players, below the salary cap.

If Kessel gets offered a sheet, the Bruins' probabilities become b and c - b is with Kessel, at his elevated price, and some other players waived/released/whatever, c is without Kessel altogether.

Let us then posit letter d - the probability of the Bruins winning the Stanley Cup in 2011 with Kessel, and e without him, having been signed by another team.

(this can also be done with projected revenues based on playoff success).

Now a is our ideal, but seems somewhat unlikely. We only include a here because it's also a comparison if the Bruins decide to make a trade with Kessel - they will have a very difficult time getting back fair value for him.

For an offer sheet, however, it's very simple - if (b+d)x < (c+e)y, where x is some number above 1 that represents the time value of money, and y represents the possible trade value of the draft picks the Bruins receive, the Bruins should pass on signing Kessel.

Obviously, none of these variables are knowable; there's a lot of uncertainty involved. What would make this more clear is the salary cap situation for the Bruins - however, this equation is only based on the fact that if Kessel is signed to a large deal, it will be very difficult to retain Marc Savard.

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