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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