1. Baseball Pay and Performance By: Mikhail Averbukh Scott Brown Brian Chase

2. Outline Introduction Introduction Research Objective Research Objective Roles Roles Existing Research Existing Research Data Source and Collection methods Data Source and Collection methods Selection Criteria Selection Criteria Findings Findings Conclusion Conclusion References References

3. Intro to Baseball Baseball is a legal monopoly No salary cap The minimum salary for the 2008 season is $390,000 Play 162 games a year Currently 30 teams

4. Objectives What is the best indicator of pay? How do teams spend their money? What factors are used to determine the “best” players? How can team and players predict salary offers based on a player’s performance?

5. Roles SQL queries, Java scripts, Salary vs. OBP, and Budget vs. Pay analysis Mikhail Averbukh Team vs. Player Performance statistics, experience attributes vs. pay Scott Brown Excel Sheet and Minitabs, performance vs. pay analsysis Brian Chase

6. Research Pay, Productivity and Aging in Major League Baseball, 2007, Turner, Chad and Hakes, Jahn. Pay, Productivity and Aging in Major League Baseball, 2007, Turner, Chad and Hakes, Jahn. Average Salary and Contract Length in Major League Baseball. Meltzer, Josh. Average Salary and Contract Length in Major League Baseball. Meltzer, Josh. Free Agency and Contract Options: How Major League Baseball Team Value Players. Dinerstein, Michael. Free Agency and Contract Options: How Major League Baseball Team Value Players. Dinerstein, Michael. Are baseball players paid too much? Moorehand, Timothy. Are baseball players paid too much? Moorehand, Timothy. Desperate GM can cripple a franchise. Law, Keith. 2007. Desperate GM can cripple a franchise. Law, Keith. 2007.

7. Data source and Collection Lahman database from baseball1.com Lahman database from baseball1.com Used Java and SQL queries Used Java and SQL queries Access Database to store data Access Database to store data Data from 2000-2007 for salary and player statistics Data from 2000-2007 for salary and player statistics Inflation in baseball salaries Inflation in baseball salaries Median salary goes up 100k/year Median salary goes up 100k/year Data put into Excel Data put into Excel Analyzed with Excel and Minitabs Analyzed with Excel and Minitabs

8. Pitching WinsLossesStrike Outs Earned Run Average (ERA) Attributes – Pitchers

9. Attributes – Batters Batting Home Runs Runs Batted In (RBIs) HitsAt Bats Batting Average On Base % (OBP)

10. Experience How long they’ve played forPersonal History Teams they have played for in the past

11. How many At Bats or how often the player gets to bat Starter, Utility Player, Substitute Playing Time

12. Results - Pitchers Correlation: 0.670 R-Squared: 0.436

13. Results - Pitchers Correlation: 0.657 R-squared:0.420

14. Results - Batters Correlation:0.737R-Squared:0.544

15. Correlation:0.722R-Squared:0.521

16. Results – Batters top 10% R-Squared:0.243

17. Results – Batters bottom 90% R-Squared:0.221

18. Results – Players with equal performance Overpaid Players Derek Jeter $21.6M Played for 12 years Captain of Yankees Jason Giambi $23.428M Highest Paid Player Played for 12 years Underpaid Players Sammy Sosa $500K Did not play in ’06 Played for 18 years Ryan Howard $900K Played for 3 years Earning $10M in ‘08

19. Results: Salary vs On Base Percentage Salary = ln(OBP/0.3196) * 10 8 The formula is 90% accurate for 17 % of players, 80% accurate for 28 % of players, 80% accurate for 28 % of players, not applicable for 30% of players(OBP < 0.3196) not applicable for 30% of players(OBP < 0.3196)

20. Results: Team budget vs pay Teams with higher budgets are able to attract better players Teams with higher budgets are able to attract better players

21. How Teams choose and pay their players Tampa Bay Devil Rays Tampa Bay Devil Rays Smaller budget so they look for player’s with less experience, but higher statistics where the player will be satisfied with their salary. Smaller budget so they look for player’s with less experience, but higher statistics where the player will be satisfied with their salary. Carl Crawford 2002-2006 makes $4.125M Carl Crawford 2002-2006 makes $4.125M New York Yankees New York Yankees High budget so more players will have a lot of experience playing with good teams, higher statistics, and be more recognized High budget so more players will have a lot of experience playing with good teams, higher statistics, and be more recognized Derek Jeter 1995-2006 makes $21.6M Derek Jeter 1995-2006 makes $21.6M

22. Experience to Salary Correlation based on Team Budget Tampa Bay Devil Rays Total Games Played by Players: 4,724 Total Combined Years of Experience: 79 New York Yankees Total Games Played By Players: 16,181 Total Combined Years of Experience: 181

23. High Market Teams Harder to play for because of combined experience, higher statistical requirements, and popularity. Players tend to stay with the team longer because of success rate

24. Lower Market Teams Easier to play for because of lower statistical requirements and bad reputation Higher turnover rates and layoffs due to lower statistics and player experience Player’s feel that other players have insufficient experience and therefore quit

25. Conclusion Pay in baseball only remotely relates to player’s performance Other factors, such as teams willingness to pay higher amounts, popularity of a team and a player are important Different teams use different strategies for pay

26. Conclusions Competition between teams for top players drive up salaries Very low pay for inexperienced players and very high pay for top players makes it hard to apply one size fits all approach in determining players’ salaries. Team owners should look out for wasteful spending and should monitor general manager decision

27. References Pay, Productivity and Aging in Major League Baseball, 2007, Turner, Chad and Hakes, Jahn. Pay, Productivity and Aging in Major League Baseball, 2007, Turner, Chad and Hakes, Jahn. http://mpra.ub.uni-muenchen.de/4326/ http://mpra.ub.uni-muenchen.de/4326/ Average Salary and Contract Length in Major League Baseball. Meltzer, Josh. www.econ.stanford.edu/academics/Honors_Theses/Theses_2005/Meltzer.pdf Average Salary and Contract Length in Major League Baseball. Meltzer, Josh. www.econ.stanford.edu/academics/Honors_Theses/Theses_2005/Meltzer.pdf Pay for Play: Are Baseball Salaries Based on Performance? Watnik, Mitchel. Journal of Statistics Education v.6, n.2 (1998) Pay for Play: Are Baseball Salaries Based on Performance? Watnik, Mitchel. Journal of Statistics Education v.6, n.2 (1998) Free Agency And Contract Options:How Major League Baseball Teams Value Players. Dinerstein, Michael. http://www- econ.stanford.edu/academics/Honors_Theses/Theses_2007/Dinerstein2007.pdf Free Agency And Contract Options:How Major League Baseball Teams Value Players. Dinerstein, Michael. http://www- econ.stanford.edu/academics/Honors_Theses/Theses_2007/Dinerstein2007.pdf Are baseball players paid too much? Moorehand, Timothy. http://www.helium.com/items/154172-imagine-which-employees-could Are baseball players paid too much? Moorehand, Timothy. http://www.helium.com/items/154172-imagine-which-employees-could Desperate GM can cripple a franchise. Law, Keith. http://insider.espn.go.com/mlb/hotstove06/insider/columns/story?columnist=la w_keith&id=2728948&univLogin02=stateChanged Desperate GM can cripple a franchise. Law, Keith. http://insider.espn.go.com/mlb/hotstove06/insider/columns/story?columnist=la w_keith&id=2728948&univLogin02=stateChanged