Marginal revenue product and salaries: Moneyball redux
AbstractScully (1974) used a two equation regression model to estimate a baseball player’s salary to compare to the actual salary the player earned in order to determine if a player is paid his net marginal revenue product. We replicate the spirit of that paper, but introduce several useful innovations to estimate net marginal revenue products for a large sample of free-agent baseball players. Our results suggest that the highest paid free agents are overpaid, while all other free agents are underpaid or paid appropriately. We found no evidence for the notion that some clubs may be more adept at finding “bargain” free agents.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 21410.
Date of creation: 01 Mar 2010
Date of revision:
net marginal revenue product; free agents; baseball;
Find related papers by JEL classification:
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
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- Scully, Gerald W, 1974. "Pay and Performance in Major League Baseball," American Economic Review, American Economic Association, vol. 64(6), pages 915-30, December.
- Michael A. Leeds & Sandra Kowalewski, 2001. "Winner Take All in the NFL: The Effect of the Salary Cap and Free Agency on the Compensation of Skill Position Players," Journal of Sports Economics, , vol. 2(3), pages 244-256, August.
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