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Renegotiation Design: Evidence from National Football League Roster Bonuses

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  • Gregor Matvos

Abstract

I exploit unique data on National Football League (NFL) players' contracts to show how contractual arrangements in the NFL shape renegotiation and through that channel significantly affect players' compensation and allocations. I show that a change in the timing of payments through the use of roster bonuses leads to contractual renegotiation and termination earlier in the off-season. This change in renegotiation incentives has quantitatively important consequences for players' compensation and allocations. Players are willing to forgo approximately $260,000 for a contract with modified renegotiation incentives. Moreover, players who are terminated earlier sign more valuable subsequent contracts and rematch with other teams more frequently. These predictions are consistent with a model in which players in the NFL are subject to contractual holdup. Designing renegotiation incentives through an altered timing of payments--the roster bonus--ameliorates this problem, which substantially increases ex post transfers of players and changes player allocations.

Suggested Citation

  • Gregor Matvos, 2014. "Renegotiation Design: Evidence from National Football League Roster Bonuses," Journal of Law and Economics, University of Chicago Press, vol. 57(2), pages 387-430.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/676647
    DOI: 10.1086/676647
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    Cited by:

    1. Steven Salaga & Brian M. Mills & Scott Tainsky, 2020. "Employer-Assigned Workload and Human Capital Deterioration: Evidence From the National Football League," Journal of Sports Economics, , vol. 21(6), pages 628-659, August.

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