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Monday, December 04, 2006
The Economics of the (Curious) MLB Posting System

Some of the problems associated with baseball's system have been discussed by Rick here, and our friend The Sports Law Professor, here. Now, some of these concerns are confirmed by economist Duane Rockerbie in a new essay posted on SSRN: Peculiarities of the Major Leage Baseball Posting System, which can be downloaded free of charge. The piece contains very little jargon (and no math) and adds texture to the problems associated with the posting system. For example, the author discusses the danger of "foreclosure," under which "one bidder prevents all other bidders from obtaining the rights to negotiate with the Japanese player, even though the winning bidder has no intention of signing the player to a contract." Because Japanese clubs must decide whether or not to accept a bid before learning the identity of the bidder, they are unable to avoid accepting a bid by a club suspected of opportunistic and disingenuous foreclosure bidding. The author describes a possible alternative, the European transfer method for soccer players, but suggests that it would not be an appropriate model for Japanese players moving to MLB because of the relatively few Japanese-MLB transitions each year.


It seems to me that there has to be some mechanism to prevent a team from making a ridiculously high bid only to block another team from signing the player (where the high bidder has no intention of trying to sign him). I would propose that the high bidder be required to pay the next highest bid if it does not sign the player by the end of the allotted period. While I've thought out how this would work in practice, I won't bother to describe all the possible scenarios here. However, I haven't come up with any that render this proposed model any worse than the status quo.

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