Abstract
This paper empirically evaluates the effects of a hypothetical hard salary cap and floor system in Major League Baseball using player-level salary and performance data from the 2006–2015 seasons. I construct Wins Above Replacement (WAR) measures for all players, estimate a log-linear market salary model to generate WAR-implied transfer prices, and simulate two redistribution mechanisms — random assignment and market bidding — under which over-cap teams shed players to under-floor teams. Competitive balance is assessed using the Actual-to-Idealized Standard Deviation Ratio (AISDR), with implied attendance effects derived from the existing literature. The results are counterintuitive: post-redistribution AISDR exceeds the baseline in most years under both methods, implying a net deterioration in competitive balance. The mechanism is structural — stripping high-WAR players from the league's top spenders collapses the upper tail of the win-percentage distribution, while redistributed talent is too diffuse across the large buyer pool to compress the distribution meaningfully from below. Market bidding further concentrates redistributed talent among large-market buyers, consistent with the Invariance Principle. These findings suggest that simple payroll redistribution mechanisms are insufficient to achieve the competitive balance goals motivating a salary cap, with direct implications for ongoing MLB collective bargaining negotiations.