Incentives to Lose: The Impact of the MLB’s Draft Format Alteration on the Performance of Struggling Teams

Abstract

In this thesis, I examine how the performance of eliminated and otherwise struggling MLB teams responded to changing incentives as a result of the MLB’s draft format adjustment in 2023. The existing literature analyzes how NBA and NHL draft format alterations impacted outcomes for eliminated teams, but there has not been a study of the effects of the MLB’s draft format change. I regress a team’s win probability on various interaction terms that include a dummy variable for being eliminated by a certain date, a dummy for possessing a win percentage below 40% on a certain date, and a continuous variable that represents a team’s difficulty of qualifying for the playoffs. I find that, unlike in previous studies, MLB’s choice to move from an inverse order draft to a weighted lottery draft had no clear effect on the performance of eliminated teams as a group. However, possessing a win percentage below 40% had a negative effect on win probability in inverse order draft seasons and an ambiguous impact in weighted lottery draft seasons. Still, the true difference between those effects remains unclear.