What is the Marginal Revenue Product* of Barry Bonds?

Barry Bonds becomes a free agent at the end of this season. Suppose the following:

  • There is a freely competitive bidding market for his services,
  • Bonds has no location preferences,
  • There is no winner’s curse in the auction for his services.

How much do you think he could raise in the market? What is the best offer a team might make to him?

The Washington Post (reg. req’d) estimates/ guesses/ speculates/ analyzes as follows:

So, how much money have you made off Barry Bonds? If you are the San Francisco Giants’ owners, perhaps the number is in the hundreds of millions of dollars. If you are the Giants’ radio or television rights-holders, perhaps in the tens of millions.

… Bonds, whose home run total sits at 722 — close enough to make a run at Hank Aaron’s career record of 755 next season — is in the final year of a five-year, $90 million contract…

“We have said many times that is a question we are not prepared to deal with until after the season,” Magowan said. “There are too many variables here, including his health and the performance of the team.”

Another variable, no doubt, is how much money Bonds can still bring in, relative to how much he would be taking out in salary. The Giants are paying Bonds $18 million this year. It is not so much a negotiation as a calculation.

Exactly! His marginal revenue product [MRP]* depends on his marginal physical product [MPP], which depends, in part, on his health; if he isn’t healthy, he won’t be contributing much to the revenues of the team.

But his MPP also depends on the quantity and quality of other inputs he has to work with. This situation is just like standard micro-theory textbook treatments in which the MPP of labour depends on the quantity of capital that labour has to work with.

In the case of Bonds, if his teammates are good, then his contributions have a bigger chance of helping the Giants (or whatever team he plays for) into the post-season gravy train. But if they are not so good, then Bonds’ skills are not worth so much to the team.

*[I wonder if, when talking about a specific player, it might be better to say “incremental” revenue product, rather than “marginal” revenue product. In many cases, we are not talking about small changes.]

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Author: John Palmer

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