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It will probably depend on how you've set your salaries in Game Setup, but I don't think I've ever seen an arbitration award higher than about $8m or 9m per year. Even superstars normally get between $6m and $9m- much less than they would get in free agency, and normally much less than they request if you offer them an extension. Vargas is, of course, guaranteed to get at least $2m, since his salary can't be cut more than 20%; if no team wants him when you shop him around, and you don't need him, I'd definitely consider releasing him.
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