Player and Organization Performance: A Study of First-time Major League Baseball Free Agents

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.