What Gets Paid? Analyzing the Major League Baseball Contract Market

Abstract

This paper aims to assess the efficiency of the Major League Baseball contract market in the past decade, given that teams are employing more analytical approaches to player evaluation. First, analysis of team-level data reveals the most important determinants of run scoring and run prevention, respectively. Models of player contract value, controlling for player-specific variables and environmental factors, then determine what is most significantly rewarded on the free agent market. Overall, teams have identified the individual skills that are most important and compensated them accordingly, and there is evidence to suggest teams are becoming smarter about this in recent years.