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Equity and arbitration in major league baseball

Listed author(s):
  • John Fizel

    (Penn State-Erie, USA)

  • Anthony C. Krautmann

    (DePaul University, USA)

  • Lawrence Hadley

    (University of Dayton, USA)

Equity theory argues that workers examine their job performance and salaries relative to workers in comparable situations. If compensation is inequitable, workers may adjust their behavior. We test the hypothesis that an arbitration-eligible player in Major League Baseball is more likely to file for arbitration and|or proceed to an arbitration hearing if he feels he is underpaid relative to his comparison other. Bivariate probit is used to increase efficiency and correct for the sample bias in estimating decision models within the two-step arbitration process. The results indicate that equity is a significant predictor of a player's unilateral decision to file but is an insignificant determinant of going to a hearing because of offsetting responses to equity by player and owner. Copyright © 2002 John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 23 (2002)
Issue (Month): 7 ()
Pages: 427-435

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Handle: RePEc:wly:mgtdec:v:23:y:2002:i:7:p:427-435
DOI: 10.1002/mde.1090
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  1. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 255-283.
  2. Paul L. Burgess & Daniel R. Marburger, 1993. "Do Negotiated and Arbitrated Salaries Differ under Final-Offer Arbitration?," ILR Review, Cornell University, ILR School, vol. 46(3), pages 548-559, April.
  3. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  4. Phillip A. Miller, 2000. "An Analysis of Final Offers Chosen in Baseball's Arbitration System," Journal of Sports Economics, , vol. 1(1), pages 39-55, February.
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