its simple: player says they deserve $X dollars based on his performance from this past year team says player deserves $Y dollars based on his performance from this past year if neither can agree to one or the other amount, or a consensus between the two, they go to arbitration. arbitrator then hears justification why player deserves what they asked for, and then hears why team feels player deserves what they offered. arbitrator than makes decision which party is right, and they get that amount, and its final. there is an automatic payscale built into pre-arb and arbitration years. if a player does terrible, they're still going to get a minimum raise because that was how it was negotiated in the collective bargaining agreement that both parties agreed too. so teams will just say thats the amount the player deserves, and if the player feels they deserve more, than it is on him and his agent to justify why they deserve more than the minimum amount for a pre-arb/arb1-3 player.