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Uncertain Prospects

Author

Listed:
  • John D. Burger

    (Loyola College in Maryland)

  • Stephen J. K. Walters

    (Loyola College in Maryland, swalters@loyola.edu)

Abstract

This study uses a unique data set and valuation method to quantify returns to teams in baseball’s high-stakes, high-risk amateur draft. Thanks to teams’ monopsony power over draftees and low-seniority players, payoffs on successful picks far outweigh losses on unsuccessful ones: the expected annual yield on the median first-round draftee is 44%. However, the pattern of returns is inconsistent with market efficiency. Expected yields are lower for high school draftees than collegians (36% vs. 57%), lower for pitchers than position players (34% vs. 52%), and decline for later-round long shots.

Suggested Citation

  • John D. Burger & Stephen J. K. Walters, 2009. "Uncertain Prospects," Journal of Sports Economics, , vol. 10(5), pages 485-501, October.
    • Handle: RePEc:sae:jospec:v:10:y:2009:i:5:p:485-501
    DOI: 10.1177/1527002509332350
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    References listed on IDEAS

    as
    1. 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.
    2. Anthony Krautmann, 2009. "Market size and the demand for talent in major league baseball," Applied Economics, Taylor & Francis Journals, vol. 41(25), pages 3267-3273.
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    4. Colin Camerer, 1998. "Bounded Rationality in Individual Decision Making," Experimental Economics, Springer;Economic Science Association, vol. 1(2), pages 163-183, September.
    5. John D. Burger & Stephen J.K. Walters, 2005. "Arbitrator Bias and Self-Interest: Lessons from the Baseball Labor Market," Journal of Labor Research, Transaction Publishers, vol. 26(2), pages 267-280, January.
    6. John D. Burger & Stephen J. K. Walters, 2003. "Market Size, Pay, and Performance," Journal of Sports Economics, , vol. 4(2), pages 108-125, May.
    7. Daniel R. Marburger, 2004. "Arbitrator Compromise in Final Offer Arbitration: Evidence from Major League Baseball," Economic Inquiry, Western Economic Association International, vol. 42(1), pages 60-68, January.
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Justin Sims & Vittorio Addona, 2016. "Hurdle Models and Age Effects in the Major League Baseball Draft," Journal of Sports Economics, , vol. 17(7), pages 672-687, October.
    2. Richard J. Paulsen, 2022. "Peer effects and human capital accumulation: Time spent in college and productivity in the National Basketball Association," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3611-3619, December.
    3. Martin B. Schmidt, 2021. "The Competitive Returns To The Global Search For Talent: Professional Sports Markets And Foreigners," Economic Inquiry, Western Economic Association International, vol. 59(1), pages 396-419, January.
    4. N. David Pifer & Christopher M. McLeod & William J. Travis & Colten R. Castleberry, 2020. "Who Should Sign a Professional Baseball Contract? Quantifying the Financial Opportunity Costs of Major League Draftees," Journal of Sports Economics, , vol. 21(7), pages 746-780, October.
    5. Robert O Deaner & Aaron Lowen & Stephen Cobley, 2013. "Born at the Wrong Time: Selection Bias in the NHL Draft," PLOS ONE, Public Library of Science, vol. 8(2), pages 1-7, February.
    6. Christopher Garmon, 2013. "Major League Baseball’s First Year Player Draft," Journal of Sports Economics, , vol. 14(5), pages 451-478, October.
    7. Michael A. Roach, 2022. "Career concerns and personnel investment in the Major League Baseball player draft," Economic Inquiry, Western Economic Association International, vol. 60(1), pages 413-426, January.
    8. Chandler Gabriel & Stevens Guy, 2012. "An Exploratory Study of Minor League Baseball Statistics," Journal of Quantitative Analysis in Sports, De Gruyter, vol. 8(4), pages 1-28, November.

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