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Monopsony Exploitation in Professional Sport: Evidence from Major League Baseball Position Players, 2000–2011

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  • Roger D. Blair
  • Brad R. Humphreys
  • Hyunwoong Pyun

Abstract

Some professional athletes still face monopsony power in labor markets, underscoring the importance of estimating players' marginal revenue product to assess its effects. We introduce two new empirical approaches, spline revenue functions and fixed‐effects stochastic production functions, into the standard Scully (1974) approach to marginal revenue product estimation and calculate Monopsony Exploitation Ratios (MERs) for position players in Major League Baseball over the 2001–2011 seasons. Estimates indicate that MERs are about 0.89 for rookie players, 0.75 for arbitration eligible players, and 0.21 for free agents. Recent collective bargaining agreements have reduced MERs for free agents, but had no effect on MERs for other players. Copyright © 2016 John Wiley & Sons, Ltd.

Suggested Citation

  • Roger D. Blair & Brad R. Humphreys & Hyunwoong Pyun, 2017. "Monopsony Exploitation in Professional Sport: Evidence from Major League Baseball Position Players, 2000–2011," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(5), pages 676-688, July.
  • Handle: RePEc:wly:mgtdec:v:38:y:2017:i:5:p:676-688
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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • Z22 - Other Special Topics - - Sports Economics - - - Labor Issues

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