Refinements to the MLB-NPB Posting System

Abstract

We theoretically and experimentally analyze recent changes in the posting system used by Japan's Nippon Professional Baseball (NPB) organization and the U.S. Major League Baseball (MLB) organization to transfer the rights of NPB players from NPB teams to MLB teams. Under the old system-a sequential, first-price sealed-bid auction among MLB teams for player negotiation exclusivity rights-the NPB team enjoyed considerable surplus from lucrative posting fees. We predict that the revised system-an English auction with an entry fee-will transfer most of the NPB's middleman benefits (posting fees) to the players through higher salaries. Additionally, we analyze a third, proposed but not adopted, mechanism-a weighted-average sealed-bid auction. Our experimental results confirm our theoretical predictions. Furthermore, under the new system, efficiency is greatest, MLB teams spend less on Japanese players, and the players' salaries increase significantly.