We all know that, in general, the teams with the big payrolls win more games than the teams with the small payrolls. We also know that payroll alone does not determine who will succeed in major league baseball. The big market Yankees and Red Sox have won a lot of games in the past ten years but the big spending hasn't really helped the Mets and Cubs. Meanwhile, the Rangers, Rays, Rockies and Marlins have gone to the World Series will small payrolls. The Marlins beat the Yankees in 2003 despite having a team payroll $104 million less than New York's. The question is: what is the expected return (in this case, wins) of an extra million dollars of team payroll?

To answer this question, I did a simple regression analysis using wins and adjusted payroll for 2001-2010. I adjusted the payroll based on the average team payroll for 2010. For example, the average 2010 payroll was 25% higher than the average 2005 payroll. Milwaukee's actual payroll was $40 million in 2005 so their adjusted payroll for that year was $50 million (25% higher). I looked at 10 years of data for 30 teams so that gave me 300 records to analyze. The regression gave me the following formula:

   Expected Wins = 68.6 + 0.135 * Adjusted Payroll

This means that each additional $7.4 million in payroll resulted in one extra win. This may not seem like a great return on investment until you know that the top 5 teams in terms of payroll spent $92 million more on average than the bottom 5 teams. With this formula, I was able to calculate an expected win total for each team/year. For example, the 2010 Giants had a payroll of $98 million (actual payroll = adjusted payroll in 2010) so their expected wins based on that payroll would be:

   Expected Wins = 68.6 + 0.135 * 98 = 81.8.

The Giants won 92 games last year so they were 10.2 games better than expected based on that payroll. By contrast, the Mariners spent $98 million and won only 61 games (21 games worse than expected).

I then averaged each club's wins and expected wins for the last ten years. Below is the final tally. The Minnesota Twins were the best team dollar-for-dollar, closely followed by the Oakland A's. These teams won an average of 88-89 games per year despite having a payroll below the league average. On the opposite end of the spectrum were small market Kansas City and medium market Baltimore. The Mets were the weakest big market club dollar-for-dollar. They had the third highest payroll in the 2001-2010 time period but lost more games than they won.

Top Five Average Opening Day Payrolls, 2001-2010

1. NY Yankees ($209 M)
2. Boston ($147 M)
3. NY Mets ($134 M)
4. LA Dodgers ($120 M)
5. Chicago Cubs ($116 M)

Bottom Five Average Opening Day Payrolls, 2001-2010

1. Florida ($47 M)
2. Tampa Bay ($48 M)
3. Pittsburgh ($53 M)
4. Montreal/Washington ($58 M)
5. Kansas City ($61 M)

Click HERE to see a similar 1995-2003 analysis.