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Marginal revenue product and salaries: Moneyball redux

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  • Rockerbie, Duane W

Abstract

Scully (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.

Suggested Citation

  • Rockerbie, Duane W, 2010. "Marginal revenue product and salaries: Moneyball redux," MPRA Paper 21410, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:21410
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    File URL: https://mpra.ub.uni-muenchen.de/21410/1/MPRA_paper_21410.pdf
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    References listed on IDEAS

    as
    1. Kenneth H. Brown & Lisa K. Jepsen, 2009. "The Impact of Team Revenues on MLB Salaries," Journal of Sports Economics, , vol. 10(2), pages 192-203, April.
    2. Krautmann, Anthony C, 1999. "What's Wrong with Scully-Estimates of a Player's Marginal Revenue Product," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 369-381, April.
    3. Scully, Gerald W, 1974. "Pay and Performance in Major League Baseball," American Economic Review, American Economic Association, vol. 64(6), pages 915-930, December.
    4. Michael A. Leeds & Sandra Kowalewski, 2001. "Winner Take All in the NFL," Journal of Sports Economics, , vol. 2(3), pages 244-256, August.
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    Cited by:

    1. repec:wly:mgtdec:v:38:y:2017:i:5:p:676-688 is not listed on IDEAS
    2. Roger D. Blair & Brad R. Humphreys & Hyunwoong Pyun, 2017. "Monopsony Exploitation in Professional Sport: Evidence from Major League Baseball Position Players, 2000–2011," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(5), pages 676-688, July.

    More about this item

    Keywords

    net marginal revenue product; free agents; baseball;

    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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