These graphics are part of an on-going arbitration research project and is co-authored by Sean Dolinar and Alex Chamberlain.
Major League Baseball’s salary arbitration wrapped up this past week after a particularly busy year where there were 14 arbitration hearings. Arbitration is a process reserved for players who have accrued three to five years of service time (or two years, if he’s Super-Two eligible; a negligible detail in the context of this post). The entire process revolves around the mechanism of the arbitration hearing, but very few cases actually make it that far. In the formal arbitration process, the team files a one-year contract offer and the player counter-files a one-year contract demand. If both parties cannot reach a formal agreement, an arbitrator is summoned to rule in favor of one party or the other — that is, the arbitrator chooses either the player’s salary demand or the team’s offer — and the contract becomes binding.
However, players and teams typically avoid arbitration by successfully negotiating a one-year salary. Sometimes, both parties file for arbitration and submit salary offers but still end up successfully negotiating without having to resort to a hearing.
The graph below visualizes this process using data obtained from MLB Trade Rumor’s Arbitration Tracker tool. Each player’s gray line represents the difference between his filing and the team’s, and the gray tick indicates the midpoint between the two. (Team filings are always less than player filings.) The yellow dot represents the contract value upon which the team and player settled.
It’s immediately noticeable that most settlements occur very close the midpoint. Since the arbitration process, if fully carried out, is a gamble for both sides, teams and players both have a strong incentive to settle before the arbitration hearing to mitigate their own risks.
A player-team settlement doesn’t have the dramatic flair of an arbitration hearing. As aforementioned, the hearing is an all-or-nothing gamble; there is a clear-cut winner and loser for each case. The gray line in the graph below represents the same filing numbers as the previous graph, but now the results are bound to either end of the range indicating if the player won (green) or if the team won (red).
Again, there’s no meeting in the middle here. Of the 14 hearings this offseason, players won six and teams won eight. An arbitrator ruled in favor of Mark Trumbo to the tune of almost $2 million; meanwhile, an arbitrator ruled against Josh Donaldson for almost the same amount. Despite having a more moderate gap of $1 million, Mat Latos and Neil Walker — the players with the two highest filings in arbitration hearings — lost their cases. Just from eyeballing the data, teams generally won the hearings with wider ranges in offers, and players generally won the hearings with narrower spreads.
The two graphics in this post represent only the cases where the team and player filed salary figures, but usually the team and player reach an agreement before filing. We wanted to provide a comprehensive and very large graphic that visualizes all the players eligible for arbitration and signed a one-year deal. We omitted multiyear contract extensions, because they are more difficult to compare since players will typically discount their one-year value in exchange for long-term security.
We’ll have more arbitration related information on the site as the project goes along, but for now, we thought you’d enjoy these looks at how the process resolved for each player this winter.
