How Much Teams Pay Per Win in MLB Free Agency

The article digs into how MLB teams value free-agent talent using WAR. It tests whether breaking the market into more granular tiers actually helps us understand dollars per win any better.

Does a four- or five-tier model really add predictive power? What happens if you separate hitters from pitchers? The article also asks how changing the definition of replacement level shifts the math behind salary and WAR, and whether the weird, non-linear pricing comes from availability and demand, not just pure talent.

Understanding the cost per WAR in free agency

Two quick ideas drive the analysis. First, does adding more tiers actually reduce error, or do we just end up chasing smaller and smaller returns because the sample sizes shrink?

Second, do hitters and pitchers behave differently enough to deserve separate price structures? The evidence leans pretty clear: after three tiers, the benefit of more granularity is tiny, and the extra complexity doesn’t pay off in the data.

Granularity of tiers and diminishing returns

Breaking things into four or five tiers barely reduces error. Smaller samples from extra tiers just make the estimates noisier, so the model loses practical usefulness.

Honestly, a three-tier setup is the most robust and easiest to interpret for free-agent pricing. Splitting hitters and pitchers apart does show some real differences, though.

In the 0-1 WAR bucket, hitters cost about $6.2M/WAR. Pitchers are way pricier, closer to $9.9M/WAR.

That gap probably comes from the premium teams place on pitcher availability. Pitchers, especially the injured ones, often get multi-year deals that front-load risk, which pushes prices up for pitchers in the 0-1 WAR group.

• Three-tier sufficiency: Going past three tiers doesn’t add much value.
• Hitters vs. pitchers: Pitchers cost more per WAR, on average.
• Availability risk matters: Injury and front-loaded contracts drive up pitcher prices.

Replacement level and the structure of the market

Another big question: how much does replacement level explain why low-WAR players look cheaper? If you tweak the baseline definition, it bumps up $/WAR, especially for players near replacement.

The author checks this out by lowering total league WAR (which raises replacement) and by ignoring negative-WAR signings, then recalculates what teams pay below replacement. Both ways, the market still sorts into three clear tiers—0-1, 1-2, and 2+ WAR—with higher $ per WAR as WAR goes up.

Raising the replacement level does squeeze the gap between tiers a bit, but it never wipes out the premium for top free agents. Even after accounting for base pay to players below replacement, the best players still get paid way more per WAR. So, there’s clearly something more than just a talent-based wage scale going on.

Impact of replacement level on dollars per WAR

Replacement-level assumptions definitely shape the dollar-per-WAR numbers, but they don’t explain away the market’s non-linear pricing. Adjusting the baseline can move things around, but it doesn’t erase the premium top free agents get.

The market just keeps showing these clear tiers, with price per WAR jumping higher at the top, no matter how you tweak the replacement baseline.

Bottom line: the premium persists, even with replacement-level tweaks

The study shows that replacement-level considerations influence how much teams pay per win, but they don’t tell the whole story. Teams still pay a lot more for the best players.

The three-tier model (0-1, 1-2, 2+ WAR) holds up as the most reliable way to look at this. There’s still a gap between hitters and pitchers, with hitters usually costing less per WAR than pitchers in the same group.

It looks like the market cares just as much about availability, durability, and demand as it does about pure talent. Even when you try to adjust the baseline, teams keep putting a premium on marquee free agents.

 
Here is the source article for this story: More Musings on What Teams Are Paying for a Win in Free Agency