Minimax after Money-Max: Why Major League Baseball Players Do Not Follow Optimal Strategies
27 Pages Posted: 2 Aug 2016 Last revised: 31 Aug 2016
Date Written: August 2016
This paper investigates if professional players follow the Minimax theorem in their strategies, using Major League Baseball playoff season data. Our empirical results show that baseball players do not optimize their strategies in the sense that their sequence of chosen strategies is predictable from their previous actions. Further analysis using individual salaries and other key contract variables indicates that more experience leads to players conducting strategies following Minimax. By contrast, a higher salary decreases a player's incentive to pursue optimal strategies and brings lower performance. We find the results to have strong implications for compensation practices in various fields.
Keywords: Minimax, Baseball, Optimal Strategy, Experience, Contract
JEL Classification: C70, D01, D80
Suggested Citation: Suggested Citation