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Contract Extensions

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  • Anthony C. Krautmann

Abstract

This article is concerned with how contract extensions create incentives that affect the characteristics of compensation of Major League Baseball players. We begin with a description of a number of attributes of the negotiation process. Using a sample of contract extensions, we summarize a number of characteristics of this phenomenon. For example, we show how both sides are made better off as a result of these negotiations and that most extensions take place during the last year of the existing contract. Furthermore, for those players with less than 6 years of service, the new contract typically extends beyond the player’s arbitration-eligible years.

Suggested Citation

  • Anthony C. Krautmann, 2018. "Contract Extensions," Journal of Sports Economics, , vol. 19(3), pages 299-314, April.
    • Handle: RePEc:sae:jospec:v:19:y:2018:i:3:p:299-314
    DOI: 10.1177/1527002516656727
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    References listed on IDEAS

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    1. R.J. Aumann & S. Hart (ed.), 2002. "Handbook of Game Theory with Economic Applications," Handbook of Game Theory with Economic Applications, Elsevier, edition 1, volume 3, number 3.
    2. Paul M. Sommers & Noel Quinton, 1982. "Pay and Performance in Major League Baseball: The Case of the First Family of Free Agents," Journal of Human Resources, University of Wisconsin Press, vol. 17(3), pages 426-436.
    3. 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.
    4. Krautmann, Anthony C, 1999. "What's Wrong with Scully-Estimates of a Player's Marginal Revenue Product," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 369-381, April.
    5. Scully, Gerald W, 1974. "Pay and Performance in Major League Baseball," American Economic Review, American Economic Association, vol. 64(6), pages 915-930, December.
    6. John Charles Bradbury, 2013. "What Is Right With Scully Estimates of a Player’s Marginal Revenue Product," Journal of Sports Economics, , vol. 14(1), pages 87-96, February.
    7. Kannai, Yakar, 1992. "The core and balancedness," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 12, pages 355-395, Elsevier.
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    Cited by:

    1. Richard J. Paulsen, 2018. "Contract Options and Performance: The Case of Major League Baseball," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 46(4), pages 379-388, December.

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