Over at The Sports Economist fellow George Mason alum Brian Goff performs a “rough experiment” to identify the “Yankee premium,” which is the amount the club pays for similar talent on other teams in MLB. Here is what he finds:
Players filling similar roles with better numbers on other teams make anywhere from the league minimum up to around $2 million per season. In total, the Yankees are paying around $165 million for players whose mirror images on other teams are making under $80 million.
And what’s the explanation? Goff provides three, but I agree with him that this one is the best.
Players negotiating with the Yankees are aware of the higher media revenues that the team generates. Rather than permit Steinbrenner to pocket all of the difference between their value to other teams and their value in NY, these players negotiate deals that capture some or most of these additional revenues.
I’m sure that Brian would be willing to hear other ideas. Good work, Brian.
Addendum: I’ve thought some more on this, and I think there is one problem with this explanation. If players are holding out for rents then Steinbrenner should be leading the charge for some sort of salary cap or maximum salary. But, media reports have Steinbrenner very much opposed to these types of controls. It doesn’t doom the explanation, I’m just pointing it out.