Who Should Sign a Professional Baseball Contract? Quantifying the Financial Opportunity Costs of Major League Draftees

Abstract

Players selected in the annual Major League Baseball First-Year Player Draft have a choice of whether to enter the system or pursue a career outside of professional baseball. As with any choice, there are opportunity costs associated with their decision. The purpose of this study was to analyze those opportunity costs by comparing draftees’ expected, non-signing-bonus income to the income of standard laborers. We estimated expected income over the first six seasons of players’ careers by combining minor and major league salary data with the probabilities obtained from C5.0 classification models that were applied to a large set of player-related data. Unlike traditional classification methods that produce the probabilities for landing in one of two classes, C5.0 classification models are able to produce the simultaneous probabilities of a player landing in several different classes, or out of professional baseball, in each season. The results show that, all else equal, college fielders drafted in the first 89–90 picks and college pitchers drafted in the first 32 picks (college graduates) or 171 picks (some college) should sign contracts. Pitchers drafted out of high school should sign contracts if they are picked in the first 78 picks, as should fielders selected in the top 118 picks. Beyond these ranges, signing bonuses or higher levels of performance are needed to limit the opportunity costs of pursuing professional baseball. Such findings are relevant to draftees making contract decisions and baseball stakeholders dealing with recent calls for improved wages and labor conditions in the minors.