Valuing Free Agents and Johnny Damon

This free agent market has been anything but predictable when trying to figure out what these free agents will go for. Productive players such as Eric Hinske have to settle for one year deals while players such as Ty Wiggington get guaranteed money across two seasons. Just this morning, Pena barely took a 1% pay cut from his 2010 salary to join the Chicago Cubs for a player that is trying to slow a statistical decline.

Fortunately for us, there are those in the industry that make it their business to evaluate players and one of the best guys for that is J.C. Bradbury of Sabernomics fame. Bradbury explains how he evaluates players in this way:

The method I use is complex and involves many steps. I explain the general theory behind marginal revenue product estimation of player worth in The Baseball Economist. I have since modified the model, which I detail in Hot Stove Economics, but the basic structure is similar. What follows is a brief explanation.

I estimate the impact of winning (via run-differential) on revenues (using Forbes’s The Business of Baseball report, various years). Then, I estimate the impact of player performance on run production (hitters) and run prevention (pitchers). These estimates are adjusted for home-park influences. I value defense based on positional importance to preventing runs and use the Plus/Minus system to adjust for defensive quality. I then convert the run-contribution estimates to dollars using the estimates of the impact of winning on revenues. Because the impact of winning on revenue is non-linear, the reported values assume that the player is added to a .500 team. Players added to teams with above (below) average records generate more (less) revenue. The estimates are also gross (not net) marginal revenue product estimates, and therefore do not account for costs such as coaching, medical care, etc.

For projecting players into the future, I assume that league revenues grow at an annual rate of nine percent, which is consistent with the history of league revenue growth. I also make an adjustment for aging based on a detailed study of how baseball players age.

Bradbury took the time to evaluate the most popular names in this year’s free agent class in November and the table below shows his values for those players, what some of them have signed at, and what the +/- is for that player:

Player Value 2011 Contract +/-
Adrian Beltre $12.6m
Lance Berkman $9.8m $8.0m $1.8m
David Bush $4.5m
Carl Crawford $15.0m
Johnny Damon $9.5m
Jorge De La Rosa $6.5m $11.25m -$4.75m
Adam Dunn $10.5m $14.0m -$3.5m
Jon Garland $8.5m
Vladimir Guerrero $7.5m
Orlando Hudson $10.0m
Aubrey Huff $11.0m $11.0m $0.0m
Derek Jeter $9.0m $17.0m -$8.0m
Paul Konerko $9.5m $12.0m -$2.5m
Hideki Kuroda $8.0m $12.0m -$4.0m
Cliff Lee $18.5m
Victor Martinez $10.0m $12.5m -$2.5m
Kevin Millwood $6.5m
Carl Pavano $9.5m
Carlos Pena $10.0m $10.0m $0.0m
Andy Pettitte $6.0m
Scott Podsednik $4.0m
J.J. Putz $5.0m $5.0m $0.0m
Chad Qualls $5.0m
Manny Ramirez $7.0m
Jon Rauch $6.0m
Edgar Renteria $6.0m
Rafael Soriano $8.6m
Jim Thome $9.5m
Juan Uribe $7.0m $7.0m $0.0m
Jayson Werth $14.0m $18.0m -$4.0m
Jake Westbrook $7.0m $8.25m -$1.25m

By Bradbury’s calculations, the current free agent class has been paid $29.7 more than their value and that is without the presumptive insane contracts that Cliff Lee and Carl Crawford have coming to them.

Lance Berkman is the only player on the list that has come at a value compared to what Bradbury has projected so when you read about Johnny Damon being interested in playing for the Rays, do the math and figure out it is very unlikely unless he takes a very large discount as I would be surprised to see the Rays pay $8.0m for Damon’s services to delay Desmond Jennings’ service time. If the goal is to get another year of control out of Jennings, there are cheaper ways to make that happen.

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About Jason Collette

Writer/Analyst
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One Response to Valuing Free Agents and Johnny Damon

  1. Great stuff!! I just can’t imagine that the Rays would send Jennings back down to AAA. Because of his callup in 2010, how does that affect his service time? Wouldn’t the Rays have to wait until July if they wanted to avoid Super 2?

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