Traditional economic analyses of the reserve clause in major league baseball view it as having arisen from the superior bargaining of owners compared to players. This article interprets it instead as promoting efficient investment by teams in player development, given the transferability of player skills to other teams. Using a principal-agent framework, the article shows that limited player mobility emerges as part of the optimal contract between players (principals) and teams (agents).
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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number
2003-01.
Length: 14 pages Date of creation: Jan 2003 Date of revision: Handle: RePEc:uct:uconnp:2003-01
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