CSS Button No Image Css3Menu.com

Baseball Prospectus home
Click here to log in Click here for forgotten password Click here to subscribe

<< Previous Article
Premium Article Skewed Left: The Squan... (04/24)
Next Article >>
Premium Article Pebble Hunting: Platoo... (04/24)

April 24, 2014

Explaining Spending

Deriving Teams' Optimal Spending Strategies

by Lewie Pollis

A couple weeks ago, I made the argument that the cost of a win on the free agent market for a given season does not represent a generally homogeneous league-wide conception of what a win is worth. Rather, the more logical explanation is that it reflects the largest amount any team would be willing to pay for the Nth win available after the first N – 1 wins were hypothetically distributed in accordance with who valued each of them most highly. (Economic theory can sound weird when you apply it to real life.)

As an economics student and baseball fan I find this idea to be fascinating, but I admit that the origin of the price of a win doesn’t have many practical uses in concrete baseball analysis. However, if I am correct, this theory does have two important implications for understanding how MLB teams (should) operate: that the price of a win and the value of a win are two different things, and that this uncoupling means a marginal win can be worth significantly different amounts to different teams.

With these assumptions in our minds, it is possible to construct a reasonably simple model for a team’s optimal player-signing and front office employee-hiring strategy in the league labor market.

The rest of this article is restricted to Baseball Prospectus Subscribers.

Not a subscriber?

Click here for more information on Baseball Prospectus subscriptions or use the buttons to the right to subscribe and get access to the best baseball content on the web.

Cancel anytime.

That's a 33% savings over the monthly price!

That's a 33% savings over the monthly price!

Already a subscriber? Click here and use the blue login bar to log in.

Related Content:  Spending

6 comments have been left for this article.

<< Previous Article
Premium Article Skewed Left: The Squan... (04/24)
Next Article >>
Premium Article Pebble Hunting: Platoo... (04/24)

Premium Article Rumor Roundup: Kenta Maeda Will Not Be Appea...
Premium Article Transaction Analysis: Live That Fantasy
Premium Article Pitching Backward: Brandon McCarthy and the ...
Premium Article Transaction Analysis: Bringing the Band Back...
Premium Article Transaction Analysis: Padres Wish Upton a St...
Premium Article Raising Aces: Best and Worst Mechanics: NL W...
Premium Article Transaction Analysis: Catchin' Relief

Premium Article What You Need to Know: Pineda and Pine Tar, ...
Overthinking It: The Obligatory Article Abou...
Premium Article Pebble Hunting: Platoonies Never Say Die
Premium Article Skewed Left: The Squandered Promise of the D...
Premium Article Minor League Update: Games of Wednesday, Apr...
Fantasy Article Free Agent Watch: Week Four
Daily League Strategy: Standing Out

2014-12-16 - Ninety-Percent Mental: It's Happening!
2014-06-12 - Model Behavior
2014-05-16 - Premium Article Front Office Expansion
2014-04-24 - Premium Article Explaining Spending
2014-04-10 - Premium Article Explaining Spending
2014-03-06 - Is the Market for MLB Front Office Employees...
2014-02-11 - Premium Article Barry Bonds, Race, and Public Perception