Claremont Colleges Scholarship @ Claremont Scripps Senior Theses Scripps Student Scholarship 2017 Compensating Against Turnover: Managers' Talent Retention Decisions in Major League Baseball Under a Budget Constraint Emma Knoesen Scripps College Recommended Citation Knoesen, Emma, "Compensating Against Turnover: Managers' Talent Retention Decisions in Major League Baseball Under a Budget Constraint" (2017). Scripps Senior Theses. 1057. http://scholarship.claremont.edu/scripps_theses/1057 This Open Access Senior Thesis is brought to you for free and open access by the Scripps Student Scholarship at Scholarship @ Claremont. It has been accepted for inclusion in Scripps Senior Theses by an authorized administrator of Scholarship @ Claremont. For more information, please contact
[email protected]. COMPENSATING AGAINST TURNOVER: MANAGERS’ TALENT RETENTION DECISIONS IN MAJOR LEAGUE BASEBALL UNDER A BUDGET CONSTRAINT by EMMA KNOESEN SUBMITTED TO SCRIPPS COLLEGE IN PARTIAL FULFILLMENT OF THE DEGREE OF BACHELOR OF ARTS PROFESSOR NAYANA BOSE DEPARTMENT OF ECONOMICS, SCRIPPS COLLEGE PROFESSOR MARK HUBER DEPARTMENT OF MATHEMATICAL SCIENCES, CLAREMONT MCKENNA COLLEGE APRIL 21, 2017 Abstract From 1997 to 1999 and 2003 to the present, Major League Baseball has had a luxury tax on high payroll teams. This paper analyzes the impact of the tax as a budget constraint on teams’ ability to reward and retain high performing players. In contrast to other papers, we use wins above replacement (WAR), a popular sabermetrics statistic, to measure performance. Using this metric, we quantify the number of top performers, how this performance is rewarded with salary, and how salary impacts players’ mobility decisions. We conclude that when using WAR, the distribution of performance is not heavy tailed and rather follows an exponential distribution.