Date of Award

2024

Document Type

Honors Thesis (Open Access)

Department

Colby College. Economics Dept.

Advisor(s)

Rob Lester

Second Advisor

Tim Hubbard

Abstract

MLB’s International Amateur Free Agent Market provides teenagers across the world opportunities to sign, develop, and potentially fulfill their dreams of playing in the MLB. It also allows teams to sign players at young ages, increasing the amount of time players can develop within a team’s minor league system. While signing bonus decision-making is backed up by a team’s scouts and data, the signing bonus a player receives is rarely a reflection of their future value. I argue that teams are not spending this money optimally. However, in an environment where players have low acquisition costs and volatile performance outcomes, is there such a thing as optimal spending? With minimal evidence, I conclude that teams shouldn’t change their spending habits when signing amateur hitters because of the existing equilibrium amongst teams. In addition, teams may be better off avoiding sixteen-year-old pitchers and instead waiting for them to show more maturity in their development.

Keywords

baseball, MLB, international, free agent, signing bonus, amateur

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