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Financing Talent Development: The Baseball Reserve System and the Hollywood Star System

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  • Thomas J. Miceli

    (University of Connecticut)

Abstract

This paper examines contractual arrangements that once governed employment relationships in two prominent entertainment industries: professional baseball and Hollywood filmmaking. The arrangements were, respectively, the player reserve system and the star system. Both were defended as necessary by the governing powers of each industry, but both were also criticized as exploitive of employees because they prevented them from negotiating as free agents with other possible employers. The argument in this paper is that these systems can be interpreted as having served a rational economic purpose; namely, to promote efficient investment in the development of would-be performers in professions where the probability of success is very low. The persistence of a limited reserve period in baseball in the presence of a strong players’ union is evidence for this claim. By contrast, the demise of the star system reflects the diminished importance of talent development by studios. JEL Classification: J30, J41, J42, J53, L14, L82 Key words: Reserve system, star system, training, incentive contracts

Suggested Citation

  • Thomas J. Miceli, 2020. "Financing Talent Development: The Baseball Reserve System and the Hollywood Star System," Working papers 2020-22, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:2020-22
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    File URL: https://media.economics.uconn.edu/working/2020-22.pdf
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    References listed on IDEAS

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    1. Patrick Bolton & Mathias Dewatripont, 2005. "Contract Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025760, December.
    2. Simon Rottenberg, 1956. "The Baseball Players' Labor Market," Journal of Political Economy, University of Chicago Press, vol. 64, pages 242-242.
    3. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    4. F. Andrew Hanssen, 2010. "Vertical Integration during the Hollywood Studio Era," Journal of Law and Economics, University of Chicago Press, vol. 53(3), pages 519-543.
    5. Thomas J. Miceli, 2004. "A Principal-Agent Model of Contracting in Major League Baseball," Journal of Sports Economics, , vol. 5(2), pages 213-220, May.
    6. Sappington, David, 1983. "Limited liability contracts between principal and agent," Journal of Economic Theory, Elsevier, vol. 29(1), pages 1-21, February.
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    More about this item

    Keywords

    reserve system; star system; training; incentive contracts;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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