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The hot stove is in full effect, and teams are taking a hard look at their rosters to prepare for the winter meetings. One team that has already been busy is the Pittsburgh Pirates, as they previously acquired Akinori Iwamura from Tampa Bay. 

Last year, one of the Pirates' most expensive players was catcher Ryan Doumit. After a .318/.357/.501 in 2008, good for a .367 wOBA, Doumit struggled with injuries in '09. He hit .250/.299/.414 and recorded a (below average for a catcher) .306 wOBA.

Prior to the 2009 season, Doumit signed a three-year, $11.5 million extension that will earn him $3.55M in 2010 and $5.1M in 2011. The deal also includes team options for 2012 ($7.25M) and 2013 ($8.25M). The speculation engines are revving up, and the suggestion is that Neal Huntington and the Pirates may deal Doumit and play Jeff Clement every day behind the plate. Additionally, it has been reported that the Brewers and Pirates discussed a swap of Doumit and J.J. Hardy.

However, some commentators have suggested Pirates would be selling low if they traded Doumit now. Here's Jorge Says No!:

Here is a guy, who is just a year removed from hitting .318 with 15 HR and 71 RBI. Doumit was one of the best hitting catchers in the NL in 2008, but he missed a large chunk of the 2009 seasons because of injuries. Doumit seems to be one of the few young catchers out there with a nice upside at the dish and he certainly did not have one of his better seasons in 2009.

So would it be a mistake for the Pirates to trade Doumit now?

I don't think so. There can be no doubt that Doumit is a risky play going forward. If the Pirates choose to keep that risk, they will keep both tails of the distribution--the world where Doumit returns to form as well as the one where he continues to scuffle. If they trade Doumit to another team, his value will necessarily be discounted by the amount of risk that comes with him.

Recently, there has been a mom's-basement size controversy over a column written by J.C. Bradbury entitled "Hot Stove Myths." He writes:

GMs can buy low and sell high -- [...] You can't sell high or buy low and profit financially because all GMs understand these things. You don't have to wait for a guy to get hot to sell him, nor dump him before he gets cold. In addition, the key knowledge of when the peak or trough is doesn't exist, except in the mind of message board posters. Fluctuations in performance create uncertainty, which affect the price that GMs are willing to pay.

It is certainly true that GMs tend to realize when a player is risky, like Doumit is, and discount his value accordingly.

But it also seems at least possible that in the short term, GMs make mistakes even in their initial valuations. If that is true, then it should absolutely be possible to find a player who is undervalued by his own team (and perhaps all other teams in the market for players with similar skill sets). If that is true, then at least some of the time, it will be possible to acquire a player for less than this true expected value.

This is especially true because of the information asymmetry created by injuries. Take Doumit. He has been a Pirate his entire career. Clearly, the team with the best knowledge of his medical circumstances is the Pirates. 

Doumit's injury, which was to the scaphoid bone in his right wrist, is the sort that can frequently cause players to lose power and bat control. However, it is not an insurmountable problem, as players like Adrian Gonzalez (torn tendon) have recovered from serious wrist injuries to regain their power stroke and then some.

Any team seeking to acquire him will of course do their due diligence and ask Doumit to undergo a physical. However, a single examination is unlikely to balance the difference in information between the two teams. As a result, teams looking to acquire Doumit may be unwilling to bid as much for Doumit's services than they would if they knew everything about his health.

How might a savvy GM respond? For one, he could provide the other team with all possible information about the player's health in the form of expert reports and medical records. If the offer were credible and accepted, it would eliminate the information asymmetry and probably raise the offer.

Given Doumit's contract, the dearth of free agent catchers, and the Pirates' prospects of contending in the near future, it is likely that Doumit has more value to another team than he does to the Pirates. Whether a trade can be worked out to the mutual benefit of the Pirates and a trading partner remains to be seen.

However, it is not necessarily true that the Pirates would be selling low on Doumit. Rather, a good deal would represent realizing a fixed return on a risky asset.