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What's Wrong with Scully-Estimates of a Player's Marginal Revenue Product

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  • Krautmann, Anthony C
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    Abstract

    Estimates of baseball players' marginal revenue product, derived from the methodology introduced by Gerald Scully over twenty years ago in the American Economic Review, suggest that even the highest-paid players are grossly underpaid. But, given the fiercely competitive bidding process for free agents, it is hard to believe that owners can maintain salaries significantly below marginal revenue product. In this paper, an alternative approach for estimating a player's economic value is proposed. It uses market information gleaned from free agent contract negotiations. When applied to the less-mobile segment of the player market, this method yields much more reasonable estimates of players' marginal revenue products. Copyright 1999 by Oxford University Press.

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    Bibliographic Info

    Article provided by Oxford University Press in its journal Economic Inquiry.

    Volume (Year): 37 (1999)
    Issue (Month): 2 (April)
    Pages: 369-81
    Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
    Handle: RePEc:oup:ecinqu:v:37:y:1999:i:2:p:369-81

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    Cited by:
    1. Aya S. Chacar & William Hesterly, 2008. "Institutional settings and rent appropriation by knowledge-based employees: the case of Major League Baseball," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(2-3), pages 117-136.
    2. John D. Burger & Stephen J.K. Walters, 2006. "The Existence and Persistence of a Winner’s Curse: New Evidence from the (Baseball) Field," Working Papers 0625, International Association of Sports Economists & North American Association of Sports Economists.
    3. Haupert, Michael & Murray, James, 2011. "Regime switching and wages in major league baseball under the reserve clause," MPRA Paper 29094, University Library of Munich, Germany.
    4. Jennifer K. Ashcraft & Craig A. Depken, II, 2007. "The Introduction of the Reserve Clause in Major League Baseball: Evidence of its Impact on Select Player Salaries During the 1880s," Working Papers 0710, International Association of Sports Economists & North American Association of Sports Economists.

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