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Do Negotiated and Arbitrated Salaries Differ under Final-Offer Arbitration?

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  • Paul L. Burgess
  • Daniel R. Marburger

Abstract

The authors investigate whether negotiated settlements differ from arbitrated ones under final-offer arbitration. Examining the salaries of all major league baseball players eligible to participate in final-offer arbitration between 1986 and 1991, they find that arbitration awards won by players are higher and those won by management are lower than negotiated settlements for players of comparable value. This evidence suggests that arbitrated settlements are of “low quality†relative to negotiated ones, in the sense that they tend to fall outside the bounds of potential negotiated settlements. Another implication of these findings, however, is that the bargaining agents retain substantial freedom to negotiate salaries that are not determined solely by arbitrator preferences.

Suggested Citation

  • Paul L. Burgess & Daniel R. Marburger, 1993. "Do Negotiated and Arbitrated Salaries Differ under Final-Offer Arbitration?," ILR Review, Cornell University, ILR School, vol. 46(3), pages 548-559, April.
    • Handle: RePEc:sae:ilrrev:v:46:y:1993:i:3:p:548-559
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    Cited by:

    1. Phillip A. Miller, 2000. "A Theoretical and Empirical Comparison of Free Agent and Arbitration‐Eligible Salaries Negotiated in Major League Baseball," Southern Economic Journal, John Wiley & Sons, vol. 67(1), pages 87-104, July.
    2. James Lambrinos & Thomas D. Ashman, 2007. "Salary Determination in the National Hockey League Is Arbitration Efficient?," Journal of Sports Economics, , vol. 8(2), pages 192-201, May.
    3. Daniel R. Marburger & Paul L. Burgess, 2004. "Can Prior Offers and Arbitration Outcomes Be Used to Predict the Winners of Subsequent Final‐Offer Arbitration Cases?," Southern Economic Journal, John Wiley & Sons, vol. 71(1), pages 93-102, July.
    4. Matthew Clayton & David Yermack, 1999. "Major League Baseball Player Contracts: An Investigation of the Empirical Properties of Real Options," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-051, New York University, Leonard N. Stern School of Business-.
    5. Daniel Marburger, 1996. "Racial discrimination and long-term contracts in major league baseball," The Review of Black Political Economy, Springer;National Economic Association, vol. 25(1), pages 83-94, September.
    6. John W. Budd & Aaron Sojourner & Jaewoo Jung, 2017. "Are Voluntary Agreements Better? Evidence from Baseball Arbitration," ILR Review, Cornell University, ILR School, vol. 70(4), pages 865-893, August.
    7. John Fizel & Anthony C. Krautmann & Lawrence Hadley, 2002. "Equity and arbitration in major league baseball," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(7), pages 427-435.
    8. J. Richard Hill & Nicholas A. Jolly, 2014. "Negotiated Settlement Under Mlb Final-Offer Salary Arbitration System," Contemporary Economic Policy, Western Economic Association International, vol. 32(2), pages 533-543, April.
    9. Lawrence Hadley & John Ruggiero, 2006. "Final-offer arbitration in major league baseball: A nonparametric analysis," Annals of Operations Research, Springer, vol. 145(1), pages 201-209, July.

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