Abstract

This research examines how Major League Baseball teams value players by integrating advanced performance metrics with detailed salary information across nine seasons (2015–2023), producing a dataset of 13,905 player observations. Treating compensation as a financial valuation problem, the study combines Wins Above Replacement and a custom built Win Shares dataset with contract data from Spotrac to evaluate how on field contributions translate into monetary outcomes. The analysis applies standard econometric tools to identify the variables most closely associated with salary determination and to assess how institutional constraints, contract structures, and organizational resources shape observed compensation patterns.
The results indicate that performance metrics correlate with salary, although the strength of this relationship varies once age, signing bonuses, and career stage are considered. WAR is associated with higher compensation, yet its explanatory power declines substantially when forward looking factors such as age and guaranteed payments are included, suggesting teams rely on expectations about future performance rather than current season output alone. Experience emerges as the most stable predictor of salary, reflecting MLB’s internal labor market structure in which arbitration eligibility and free agency thresholds govern compensation progression independent of measured productivity. Signing bonuses carry a consistent premium relative to annual salary, implying teams place considerable value on guaranteed, upfront compensation as a hedge against performance volatility. Team financial capacity also plays a significant role, as franchise valuation predicts individual salaries even after controlling for performance and position, indicating organizational resources influence bargaining outcomes beyond what on field metrics alone would imply.
These patterns portray MLB’s compensation system as a hybrid of market based performance pricing and institutionally driven wage setting. Player salaries reflect measurable contributions, career progression within a rules based system, and the financial strength of employing organizations. By constructing a player level Win Shares dataset and combining it to salary information, the study provides a structured foundation for examining how performance, institutional rules, and organizational finance jointly determine compensation. The findings offer insight into payroll structuring, contract design, and prospect valuation, and they highlight how financial disparities across teams shape competitive balance in professional sports.