IDEAS home Printed from
   My bibliography  Save this article

Contract Length and the Return to Performance in Major League Baseball


  • Anthony C. Krautmann

    (DePaul University)

  • Margaret Oppenheimer

    (DePaul University)


This article focuses on the relationship between contract length and compensation in Major League Baseball. Because the best players receive both the highest salaries and the longest contracts, wage regressions that omit length can lead to misleading inferences. Although contract duration is positively related with salaries, the authors find evidence of a negative relationship between contract length and a player’s return to performance. These results indicate some type of trade-off going on in the negotiation process that has not been identified in the previous literature on compensating wage differentials.

Suggested Citation

  • Anthony C. Krautmann & Margaret Oppenheimer, 2002. "Contract Length and the Return to Performance in Major League Baseball," Journal of Sports Economics, , vol. 3(1), pages 6-17, February.
  • Handle: RePEc:sae:jospec:v:3:y:2002:i:1:p:6-17

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
    2. John M. Gandar & William H. Dare & Craig R. Brown & Richard A. Zuber, 1998. "Informed Traders and Price Variations in the Betting Market for Professional Basketball Games," Journal of Finance, American Finance Association, vol. 53(1), pages 385-401, February.
    3. Sauer, Raymond D, et al, 1988. "Hold Your Bets: Another Look at the Efficiency of the Gambling Market for National Football League Games: Comment," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 206-213, February.
    4. Russo, Benjamin & Gandar, John M. & Zuber, Richard A., 1989. "Market rationality tests based on cross-equation restrictions," Journal of Monetary Economics, Elsevier, vol. 24(3), pages 455-470, November.
    5. W. David Walls, 1995. "An Econometric Analysis of the Market for Natural Gas Futures," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 71-84.
    6. McCullough, B. D., 1997. "An analysis of stock market transactions data," The Quarterly Review of Economics and Finance, Elsevier, vol. 37(4), pages 887-903.
    7. Gray, Philip K & Gray, Stephen F, 1997. " Testing Market Efficiency: Evidence from the NFL Sports Betting Market," Journal of Finance, American Finance Association, vol. 52(4), pages 1725-1737, September.
    8. Blum, U. & Dudley, L., 1990. "A Spatial Model of the State," Cahiers de recherche 9030, Universite de Montreal, Departement de sciences economiques.
    9. Gandar, John, et al, 1988. " Testing Rationality in the Point Spread Betting Market," Journal of Finance, American Finance Association, vol. 43(4), pages 995-1008, September.
    10. Losey, Robert L & Talbott, John C, Jr, 1980. " Back on the Track with the Efficient Markets Hypothesis," Journal of Finance, American Finance Association, vol. 35(4), pages 1039-1043, September.
    11. Ederington, Louis H. & Huang, Chao-Hsi, 1995. "Parameter uncertainty and the rational expectations model of the term structure," Journal of Banking & Finance, Elsevier, vol. 19(2), pages 207-223, May.
    12. Woodland, Bill M & Woodland, Linda M, 1991. "The Effects of Risk Aversion on Wagering: Point Spread versus Odds," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 638-653, June.
    13. Zuber, Richard A & Gandar, John M & Bowers, Benny D, 1985. "Beating the Spread: Testing the Efficiency of the Gambling Market for National Football League Games," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 800-806, August.
    14. Golec, Joseph & Tamarkin, Maurry, 1991. "The degree of inefficiency in the football betting market : Statistical tests," Journal of Financial Economics, Elsevier, vol. 30(2), pages 311-323, December.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:kap:iaecre:v:19:y:2013:i:3:p:215-232 is not listed on IDEAS
    2. Dietl Helmut M & Duschl Tobias & Lang Markus, 2011. "Executive Pay Regulation: What Regulators, Shareholders, and Managers Can Learn from Major Sports Leagues," Business and Politics, De Gruyter, vol. 13(2), pages 1-32, August.
    3. Hsuan-Yu Lin & Chih-Hai Yang, 2016. "Uncertainty, specific investment, and contract duration: evidence from the MLB player market," Empirical Economics, Springer, vol. 50(3), pages 1009-1028, May.
    4. Haupert, Michael & Murray, James, 2011. "Regime Switching and Wages in Major League Baseball under the Reserve Clause," MPRA Paper 29094, University Library of Munich, Germany.
    5. Wiseman Frederick & Chatterjee Sangit, 2010. "Negotiating Salaries through Quantile Regression," Journal of Quantitative Analysis in Sports, De Gruyter, vol. 6(1), pages 1-15, January.
    6. Helmut Dietl & Tobias Duschl & Markus Lang, 2010. "Gehaltsobergrenzen und Luxussteuern: Erkenntnisse aus dem professionellen Mannschaftssport," Working Papers 0039, University of Zurich, Center for Research in Sports Administration (CRSA).
    7. Holmes, Paul, 2011. "New evidence of salary discrimination in major league baseball," Labour Economics, Elsevier, vol. 18(3), pages 320-331, June.
    8. Heather O’Neill, 2013. "Do Major League Baseball Hitters Engage in Opportunistic Behavior?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 19(3), pages 215-232, August.
    9. 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.
    10. D Berri & R Simmons, 2007. "Race and the evaluation of signal callers in the national football league," Working Papers 591147, Lancaster University Management School, Economics Department.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:jospec:v:3:y:2002:i:1:p:6-17. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publications). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.