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Free Agency, Long-Term Contracts and Compensation in Major League Baseball: Estimates from Panel Data

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  • Kahn, Lawrence M

Abstract

Using longitudinal data for major league baseball players, this paper estimates the effects of eligibility for free agency or arbitration on compensation and contract duration. Becaus e eligibility is based on experience and better players are kept longe r, a fixed effects approach is used. Arbitration and free agency eligibility both raised annual compensation; however, only free agen cy raised contract duration. The free agency findings are consistent wi th Nash bargaining; however, additionally considering the arbitration results suggests the "winner's curse": duration rises only when a team might lose a player. The auction market is thus avoided. Copyright 1993 by MIT Press.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 75 (1993)
Issue (Month): 1 (February)
Pages: 157-64

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Handle: RePEc:tpr:restat:v:75:y:1993:i:1:p:157-64

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Web page: http://mitpress.mit.edu/journals/

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Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

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Cited by:
  1. Dr Alex Bryson, 2009. "The Returns to Scarce Talent: Footedness and Player Remuneration in European Soccer," NIESR Discussion Papers 2395, National Institute of Economic and Social Research.
  2. 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-.
  3. Lawrence M. Kahn, 2000. "The Sports Business as a Labor Market Laboratory," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 75-94, Summer.
  4. Eberhard Feess & Bernd Frick & Gerd Muehlheusser, 2004. "Legal Restrictions on Buyout Fees: Theory and Evidence from German Soccer," Diskussionsschriften dp0411, Universitaet Bern, Departement Volkswirtschaft.
  5. Turner, Chad & Hakes, Jahn, 2007. "Pay, productivity and aging in Major League Baseball," MPRA Paper 4326, University Library of Munich, Germany.
  6. Jahn K. Hakes & Raymond D. Sauer, 2006. "An Economic Evaluation of the Moneyball Hypothesis," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 173-186, Summer.
  7. Gary Koop, 2004. "Comparing the Performance of Baseball Players: A Multiple Output Approach," ESE Discussion Papers 72, Edinburgh School of Economics, University of Edinburgh.
  8. Heather O’Neill, 2013. "Do Major League Baseball Hitters Engage in Opportunistic Behavior?," International Advances in Economic Research, Springer, vol. 19(3), pages 215-232, August.
  9. Turner, Chad & Hakes, Jahn Karl, 2007. "The Collective Bargaining Effects of NBA Player Productivity Dynamics," MPRA Paper 5058, University Library of Munich, Germany.
  10. Hamermesh, Daniel S. & Pfann, Gerard Antonie, 2009. "Markets for Reputation: Evidence on Quality and Quantity in Academe," CEPR Discussion Papers 7603, C.E.P.R. Discussion Papers.
  11. Jahn K. Hakes & Chad Turner, 2008. "Long-Term Contracts in Major League Baseball," Working Papers 0831, International Association of Sports Economists & North American Association of Sports Economists.
  12. Pelnar, Gregory, 2007. "Antitrust Analysis of Sports Leagues," MPRA Paper 5382, University Library of Munich, Germany.
  13. Joel Maxcy, 2004. "Motivating long-term employment contracts: risk management in major league baseball," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(2), pages 109-120.

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