Long-Term Contracts in Major League Baseball
AbstractLong-term deals are one tool that both players and franchises use to manage risk. That tool has been much discussed and empirically tested with respect to player shirking, and has more briefly, and only theoretically, discussed with respect to reducing variance in future payrolls. Our work looks at how patterns of use of long-term contracts are affected by changes in contracting rules established through collective bargaining and by expected changes in franchise revenue streams. To accomplish this, we have assembled the most complete dataset of MLB player contracts to date. We analyze changes in contract length and dollar value across players of different ability levels, at different points in their careers (contract status), by position, across CBA agreements, and further examine if new stadiums and new television deals impact contract terms. We confirm the earlier finding that player performance is systematically higher during contract years than during the early portion of a long-term contract. We also find that inclusion of contract length information significantly reduces the unexplained variation in player salaries.
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Bibliographic InfoPaper provided by International Association of Sports Economists & North American Association of Sports Economists in its series Working Papers with number 0831.
Length: 45 pages
Date of creation: Dec 2008
Date of revision:
Major League Baseball (MLB); long-term contracts; player salaries and performance; collective bargaining agreements (CBA);
Find related papers by JEL classification:
- L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
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