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Tuesday, July 19, 2011
Arbitration rule: 40/60/80
We’re interested in exploring the 40/60/80 rule that many statistical writers use when analyzing contracts for arbitration eligible players. We thought we’d ask you about the rule, since it’s our understanding that you built on research by David Studenmund on the subject. When should the 40/60/80 rule be used in your estimation?
It’s a rule of thumb, and should be used generally speaking. If you look at specific players, you really should look at “comps” (comparable players). So, for example, if you look at Verlander, Felix, JJ, Weaver’s first arb-eligible year, they all signed for around 3.5MM$ to 4MM$. But Lincecum got far more than that (9MM$).
If you consider that they would have received 25MM$ in free agency, then the 40% rule would have said 10MM$. So, we see that in extreme cases, the 40/60/80 rule doesn’t necessarily apply. Therefore, in addition to the rule, you need to have a “cap”, based on historical precedent.
Not to mention you have an extreme-rare case like Lincecum, who is really no better or worse than the others I mentioned (and if he is better, then he’s marginally better), but managed to get a Cy Young (two actually).
So, if you are trying to figure something more robust, I would not rely on the rule of thumb. You’d have to come up with something not so linear. For example, rather than a hard 40% for expected WAR, it would have a sliding scale that might be 60% for expected WAR for low WAR players down to 15% expected WAR for high WAR players, with bonus points for Cy and MVP (to take care of Ryan Howard, Justin Morneau, etc). The average will be close to say 40%, but it won’t be so linear.
Or, more likely, you can forget about WAR altogether, and come up with a Arb-based value for a player, that overweights RBI, HR, SV, W, and underweights walks, etc.
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