The Going Free Agent Rate

Posted by on Saturday, March 9, 2019 in Major League Baseball, Sports Econ Blog.

The Going Rate for the 2019 Free Agent (Tier 3) monopoly market.

After all is said and done the present values of the 2 deals for Bryce Harper and Manny Machado are about the same at around $200 million in 2019.

The going rate for appears to be around $7.5 million PV per WAR in large markets like Philadelphia, which is the same as it was 3 years ago in 2016 when Boston signed David Price for $217 million over 7 years/ (2016-22). PV = $165 million.

This FA rate is systematically biased upward because of the winner’s curse inefficiencies inherent in the asymmetric monopoly power of the external free agent market.

The amount of the external market tier 3 bias can be approximated at 30 percent by a comparison with the relatively efficient pre-free agent internal market price of $5.25 million PV per WAR (resigned own player with 2 years @ $31.25 million remaining in existing 2015-20 contact) to be paid by the LA Angels of Anaheim for Mike Trout ($426.5 million over 12 years 2019-30.)

Contract salary analysis for David Price in 2016 paints a clear picture of the 3 tier labor market discussed earlier in the Labor Market Twist and The Baseball Way.

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