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Are MLB signing bonuses too high? An analysis of player production and investments in draft picks

by Hall, Timothy Persson, Jr.

Abstract

Major League Baseball (MLB) teams are often criticized for overspending on amateur draft picks. Sports business professionals and the casual baseball fan argue that awarding unproven amateur baseball players millions dollar signing bonuses is not a sound investment. However, previous studies in sports economics have found that teams are willing to sign better players to higher salaries or signing bonuses in order to increase their production or team wins. Similar to the labor market, baseball teams will attempt to create a product (team wins) by employing signing inputs (players who provide skills and services). This paper attempts to quantify or place monetary values on a single total value baseball statistic, Wins Above Replacement (WAR), to determine the Market Value of a baseball player’s production. WAR represents the additional amount of wins a player contributes to his team over a season. This paper then tests the overall performance and investment of baseball draftees from the 1996 through the 2000 Rule IV Draft. Results of this study reveal that professional baseball teams on average receive a very positive return on their investment in amateur drafts picks.

Note

Includes bibliographical references.

Administrative Notes

None

Copyright
Copyright restrictions apply.
Publisher
Colorado College
PID
coccc:5776
Digital Origin
born digital
Extent
66 pages : illustrations (some color)
Thesis
Senior Thesis -- Colorado College
Thesis Advisor
Lybecker, Kristina
Department/Program
Economics and Business
Degree Name
bachelor
Degree Type
Bachelor of Arts
Degree Grantor
Colorado College
Date Issued
2012