Abstract
Since Major League Baseball instituted free agency in 1976, scholars have observed notable increases and decreases in player performance around their eligibility to negotiate as free agents. Beginning with a sample of 305 position players (non-pitchers), this study uses two competing theories of human behavior to explain such changes in player performance between their contract year (year before becoming eligible for free agency) and free-agent year (year after signing a free-agent contract) and explores the impact of player performance on organization revenue in the free-agent year. Based on a comparison of actual and estimated performance in the contract year, 51 players who underperformed were found to have improved performance in their free-agent year and their contributions to organization revenue exceeded their salary. In contrast, 50 players who overperformed in their contract year experienced reduced performance in their free-agent year and their salary exceeded their contributions to organization revenue.
Highlights
“Every free-agent contract in baseball is a gamble.” This was the opening sentence in Washington Post sports writer Dave Sheinin’s July 14, 2017 column as he reflected on the Boston Red Sox signing of Pablo Sandoval, who became a first-time Major League Baseball (MLB) free agent after the 2014 season
Using the Breusch-Pagan Test, results confirmed the presence of heteroscedasticity in the proposed estimate model (Equation 2), it was reestimated using Weighted Least Squared (Williams [24]) where two independent variables, Age and Age2 were found to be insignificant in estimating contract-year On-base plus slugging percentage (OPS)
Consistent with equity theory, 51 players categorized as contract-year underperformers significantly increased performance in their free-agent year, while 50 players categorized as contract-year overperformers significantly decreased free-agent year consistent with expectancy theory
Summary
“Every free-agent contract in baseball is a gamble.” This was the opening sentence in Washington Post sports writer Dave Sheinin’s July 14, 2017 column as he reflected on the Boston Red Sox signing of Pablo Sandoval, who became a first-time Major League Baseball (MLB) free agent after the 2014 season. Since the inception of free agency in 1976, scholars have documented significant changes in player performance prior to, and after signing a free-agent contract (for example, see Duchon & Jago [1]; Ahlstrom et al.[2]; and Estes[3]). The existing academic literature dedicated to MLB free agency has consistently used equity theory and expectancy theory to explain variations in player performance in the year prior to, and the year after signing a free-agent contract. Complicating an organization’s decision to sign a free agent is the fact this opportunity for significant player Expectancy theory is one of the most popular theories of wealth typically occurs at the intersection of a player’s first work motivation among organizational scientists (Locke opportunity for free agency (Isaacs [6]), peak performance [13]). This study draws on expectancy theory, predicting that players who overperformed in their contract year as compared to estimated performance significantly decreased performance in their free-agent year, such that it produced added monetary benefit to the player
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