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April 10, 2014

Explaining Spending

How the Market Sets the Price of a Win

by Lewie Pollis

This article started with the realization that I had been wrong. Believe it or not, it’s happened before; unlikely as it seems, it may happen again. I think I’ve got it right this time, but in the spirit of intellectual honesty and taking responsibility for my past arguments, I wanted to note that I’ve been down this road before.

If you’ve seen…well, just about anything I’ve published about baseball over the last several months, you may know that I am particularly interested in how markets in baseball work (and I don’t just mean for players). At some point in the months-long process of writing my senior thesis, I had what I thought was an epiphany: If MLB teams are anything close to rational, the cost of a win on the free agent market must be approximately equal to how much a marginal win is worth across the league. It seemed logical, and it was eloquent in its simplicity.

I now have a different idea about where the cost of a win comes from—it’s more convoluted, but it also makes more sense. And in order to properly explain why I think I’m right this time, I have to start with why I was wrong before.

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Related Content:  Spending,  Cost Of A Win

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