The arbitration process is intended to mimic the market value of players, but it falls short in several ways. Precedents based on outdated player evaluation methods mean that arbitration values can vary significantly from market values. The comparables-based system that relies heavily on past salaries has difficulty adjusting to economic changes, as well as adjusting for multi-year contracts and extensions to arrive at an equivalent valuation for a one-year contract.

The system has proven unable to keep up with rising revenues and market values, and the amount arbitration-eligible players receive relative to comparable free agents has been decreasing over the past couple decades.

An open-market system based on the restricted free agent model used in other sports addresses these issues, and can be modified to fit the peculiarities of MLB’s arbitration system if so desired. This might seem like a radical change to bring to a system so entrenched in the game, but MLB has used a similar open-market solution to address the problem with free agent compensation in the past. … Read More

(via The Hardball Times)