Using Business Analytics to Understand Salary Structure in

Baseball

Seth SalerFURMAN ENGAGED

2014

The Questions• What is the relationship between

payrolls, wins, and other relevant statistics?

• What can sabermetrics tell us about individual players and their salaries?

• Does Major League Baseball need a salary cap? A salary floor?

The Problem

The Problem

The Problem

The Problem

The Problem

The Methods• Multiple Linear Regression• Endogenous variables, exogenous variables,

coefficients

• Clustering• Algorithmically assorting data by similarities

into “clusters”

• Logistic Regression• Predict the outcome of a categorical

dependent

The Data• FanGraphs.com

• BaseballProspectus.com

• Baseball-Reference.com

• BaseballPlayerSalaries.com

• Fathom.info

The Answer: Salary and Wins

The Answer: Individuals

The Answer: Cap or Floor?● “The fear is that in the absence of

salary caps or other regulatory mechanisms, smaller-market teams will be unable to remain competitive.”

Lewis, Michael. "Individual Team Incentives and Managing Competitive Balance in Sports Leagues: An Empirical Analysis of Major League Baseball." Journal of Marketing Research 45.5 (2008): 535-549.

The Future• Solve the issue of multicollinearity

• Separate each season and use the same methods of analysis

• Explore the differential impact of salary floor and cap impositions

• Include variables from Players’ and Owners’ Associations