Unless you're a decently avid baseball fan, you have no idea what Type A or Type B free agents are. This is partly a primer, partly an analysis and partly a proposal for improvement. Major League Baseball realized that high-price free agents tend to sign with large-market teams, those with more money. To help parity and compensate the teams that lost these free agents, type A and B free agents were created. To simplify things, the team signing the free agent will be called the signing team and the team losing the free agent will be called the losing team.
The Elias Bureau ranks all players using pretty basic counting stats: H's, RBI's, G's, AB's, IP's, ERA and then separates all players into tiers: Type A, Type B and the rest. If a team signs a Type A free agent, they give up their first round draft pick (2nd round if their pick is in the top 15) and MLB gives a compensatory pick to the losing team (a pick after the first round but before the second round). If a team signs a Type B free agent, they give up a second round draft pick and MLB gives a compensatory pick after the second round to the losing team. A small caveat: the losing team must offer the free agent arbitration and the free agent must decline it. It helped distribute talent somewhat, but has led to some serious market inefficiencies. 1) The Elias Rankings do a pretty poor job at actually ranking players based off of value. While not publicly available, the formula has been reverse engineered and playing time is a large component. It's also calculated over a two year period and quite a bit can change within that time span. 2) Relievers are the most overvalued as they are equally treated by Elias even though they are much less valuable than position players or starting pitchers. As a result, relievers receive below market value in the free agent market as the signing team must relinquish a draft pick, often making the signing not even worth it.
These inefficiencies have been exploited, most notably by Tampa Bay and more recently by Toronto. Both of those teams have amassed a number of relievers that gain Type A or B status, offer them arbitration, then collect the draft picks when those players are signed in free agency. Tampa Bay parlayed this strategy into 10 extra picks in the 2011 draft, all in the first 80 picks or so. Toronto looks to do the same for the 2012 draft. So how do we improve this? For one, alter the Elias Rankings. I'm not saying switch to WAR necessarily, but many statistics exist that would do a better job of ranking players. This alteration would reduce the number of relievers gaining Type A or B status, which would eliminate an inefficiency and better allow these relievers to get market value in free agency. The tweaks are easy to make and would result in a better functioning system both in free agency salaries and in talent distribution and overall parity.
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