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A Nash Bargaining Model of the Salaries of Elite Free Agents

Author

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  • John L. Solow

    (Department of Economics, University of Iowa, Iowa City, IA, USA, john-solow@uiowa.edu)

  • Anthony C. Krautmann

    (Department of Economics, DePaul University, Chicago, IL, USA)

Abstract

In this paper, we focus on how rents are divided between an elite free agent and a team in a Nash bargaining framework. In order to find the Nash bargaining solution, we identify the threat points of the player and the team as the best alternative bargains that the player and the team could reach with another team and another player, respectively. We then extend the analysis to include a consideration of multiple teams potentially bidding for the free agent’s services. In this section of the paper, we show that the player’s ultimate location and salary are determined by his marginal value over his replacement.

Suggested Citation

  • John L. Solow & Anthony C. Krautmann, 2011. "A Nash Bargaining Model of the Salaries of Elite Free Agents," Journal of Sports Economics, , vol. 12(3), pages 309-316, June.
    • Handle: RePEc:sae:jospec:v:12:y:2011:i:3:p:309-316
    DOI: 10.1177/1527002511404781
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    References listed on IDEAS

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    Cited by:

    1. Rodney Fort & Young Hoon Lee & Taeyeon Oh, 2019. "Quantile Insights on Market Structure and Worker Salaries: The Case of Major League Baseball," Journal of Sports Economics, , vol. 20(8), pages 1066-1087, December.
    2. Anthony C. Krautmann, 2013. "What Is Right With Scully Estimates of a Player’s Marginal Revenue Product," Journal of Sports Economics, , vol. 14(1), pages 97-105, February.
    3. Alex Bryson & Giambattista Rossi & Rob Simmons, 2012. "Why Are Migrants Paid More?," CEP Discussion Papers dp1134, Centre for Economic Performance, LSE.
    4. Alex Bryson & Giambattista Rossi & Rob Simmons, 2014. "The Migrant Wage Premium in Professional Football: A Superstar Effect?," Kyklos, Wiley Blackwell, vol. 67(1), pages 12-28, February.
    5. Paul Madden, 2018. "Collective Bargaining in a Basic North American Sports League Model," Economics Discussion Paper Series 1812, Economics, The University of Manchester.
    6. Paul Madden, 2019. "Collective Bargaining in a Basic North American Sports League Model With Broadcasting Revenue," Journal of Sports Economics, , vol. 20(8), pages 1088-1118, December.
    7. Anthony C. Krautmann, 2017. "Risk-Averse Team Owners and Players’ Salaries in Major League Baseball," Journal of Sports Economics, , vol. 18(1), pages 19-33, January.
    8. Stephen J. K. Walters & Peter Allmen & Anthony Krautmann, 2017. "Risk Aversion and Wages: Evidence from the Baseball Labor Market," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 45(3), pages 385-397, September.
    9. Alex Bryson & Giambattista Rossi & Rob Simmons, 2012. "Why Are Migrants Paid More?," CEP Discussion Papers dp1134, Centre for Economic Performance, LSE.
    10. James Alm & William H. Kaempfer & Edward Batte Sennoga, 2012. "Baseball Salaries and Income Taxes," Journal of Sports Economics, , vol. 13(6), pages 619-634, December.
    11. Yuyu Li & Bo Huang & Fengming Tao, 2016. "Pricing Mechanism Design for Centralized Pollutant Treatment with SME Alliances," IJERPH, MDPI, vol. 13(6), pages 1-13, June.
    12. John L. Solow & Anthony C. Krautmann, 2020. "Do You Get What You Pay for? Salary and Ex Ante Player Value in Major League Baseball," Journal of Sports Economics, , vol. 21(7), pages 705-722, October.

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