The introduction of free agency into the MLB in 1976 brought great skepticism regarding how it might disrupt competitive balance. It is shown that competitive balance actually increases with free agency within the MLB. This paper provides the theoretical framework to demonstrate how the labor market is more efficient when free agency is present. A predictive model was built using data from MLB players who had at least seven years of experience after the 2019 season. This model was then implemented to predict the salaries of top performing players, both rookies and free agents, to determine their market value. The predicted salary was then compared to the player's rookie salary to demonstrate that free agency allows players to be paid appropriately for their talent since the predictive wages are significantly higher than a player's rookie salary.
Business Economics; Mathematics
Stern, Brett, "Hit or Miss: An Examination of how Free Agency Affects Competitive Balance through the Major League Baseball (MLB) Labor Market" (2021). Senior Independent Study Theses. Paper 9573.
Competitive Balance, Major League Baseball (MLB), Free Agency
Bachelor of Arts
Senior Independent Study Thesis
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