I think most leagues use a slightly higher cap in-season.
I'd make free agent adds $5-10 next season to keep. To me having a Trout type player and have a $1 or $2 price tag early in his career does a league more harm than good. Auction leagues are ideal if you have owners with the same basic knowledge and interest. It doesn't take long for the sharp owners to assemble great low priced teams and leave weaker owners with the franchise in shambles. Having values go up every 5 years certainly helps, and prevents star rookies from having super contracts. Keeping an auction league competitive is something to keep in mind when setting up the rules. The # of keepers really isn't a huge issue; the good contracts get kept and the rest don't.
What is going to end up happening is guys with expiring contracts are going to get traded for next to nothing to contending teams. Your cap will help but it'll still make for some ugly trades
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