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Arbitration Baseball Has Huge Impact on Team Decisions

Tuesday, October, 18, 2011


Arbitration baseball has left many avid sports watchers with the indelible and accurate impression that much of what makes a team a winner or loser is its roster of players.  Arbitration plays a key role in determining which players clubs will be able to add to their line-up.

 

Arbitration Baseball Example Demonstrates its Impact

 

A case in point is David Ortiz, who was a slugger for the Minnesota Twins team in 2002.  The Twins attempted to trade him, but were unsuccessful, perhaps because of his tendency to sustain injuries.  In the end, they decided to non-tender him instead.  The impetus for this decision was a reluctance to face an arbitration panel, which potentially could have issued an award of $2.5 million.  This amount would have been financially devastating for the Twins.

 

As it was, the decision to non-tender Ortiz worked to the benefit of Theo Epstein, who had recently acquired the job of general manager for the Boston Red Sox.  Epstein picked up Ortiz for his own roster and paid only about half of what would normally be the price.  With Ortiz in place, the Red Sox went on to reach the playoffs that same year, later winning the World Series, a feat for which Ortiz is largely credited.

 

Without baseball's arbitration rules, however, it could all have gone very differently.

 

Another use of arbitration panels to make decisions is trademark arbitration.