Overview of Contract Incentives

This project is focused on incentives in professional contracts for MLB players. I have taken a broad approach to what constitutes an ‘incentive’, and, for the purposes of this project, an incentive is a conditional term in an MLB contract that has two components:

1. A player or team acquires compensation or rights beyond those guaranteed in the contract upon the occurrence of a defined event; and,

2. The triggering event is a contingency related to the player.

Incentives appear most often in the form of ‘performance bonuses’, which provide for additional potential earnings based on player usage during the contract (eg. how many appearances, at bats, or innings pitched a player has), and ‘award bonuses’, which provide for additional potential earnings if the player wins certain awards during the contract. However, these are not the only form of incentives, as many contracts contain incentives related to other contingencies, including player health and availability, whether a player is traded, and what position/role a player is used in. As discussed in more detail in the Rules section of this site, there are restrictions on what is a permitted contingency which can be used as the basis for an incentive.

Some incentives also have a more complex reward structure than a simple cash payment. For example, incentives may guarantee a player option, increase the value of a buy-out for a team option, or escalate salaries for all subsequent years in a contract.