Quantifying Market Inefficiencies in the Baseball Players’ Market

Ben Baumer () and Andrew Zimbalist ()
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Ben Baumer: Department of Mathematics and Statistics, Smith College, Burton Hall 308, Northampton, MA 01063, USA.
Andrew Zimbalist: Department of Economics, Smith College, Wright Hall 103, Northampton, MA 01063, USA.

Eastern Economic Journal, 2014, vol. 40, issue 4, 488-498

Abstract: Among the central arguments of the bestselling book and movie Moneyball was the allegation that the labor market for baseball players was inefficient in 2002. At that time, Billy Beane and the Oakland Athletics used observations made by statistical analysts to exploit this market inefficiency, and acquire productive players on the cheap. Econometric analysis published in 2006 and 2007 confirmed the presence of an inefficient market for baseball players, but left open the question of to what extent, and how quickly, a market correction would occur. We find that this market had in fact already corrected by 2006, and moreover argue that the perceived market response to Moneyball in 2004 is properly viewed as part of a more gradual longer-term trend. In addition, we use official payroll data from Major League Baseball to refute a previous observation that the relationship between team payroll and performance has tightened since the publication of Moneyball.

Date: 2014
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