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The Underpayment of Restricted Players in North American Sports Leagues

Author

Listed:
  • Anthony C. Krautmann

    (DePaul University)

  • Peter von Allmen

    (Moravian College)

  • David Berri

    (Southern Utah University)

Abstract

In this paper,we consider whether underpaying players restricted by the reserve clause is a common practice in the three largest sports leagues in North America—the NFL, NBA, and MLB. Our results are consistent with the hypothesis that owners of professional sports teams do exercise monopsony power whenever and wherever they can. Although differences exist across the three sports, our results indicate that in general: restricted players are underpaid; when the negotiating power of players rises, owners are less able to extract a surplus; and, the greatest surplus tends to be extracted from those who create the greatest amount of value.

Suggested Citation

  • Anthony C. Krautmann & Peter von Allmen & David Berri, 2009. "The Underpayment of Restricted Players in North American Sports Leagues," International Journal of Sport Finance, Fitness Information Technology, vol. 4(3), pages 161-175, August.
    • Handle: RePEc:jsf:intjsf:v:4:y:2009:i:3:p:161-175
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. IJSF 4.3 Available
      by brhumphreys in International Journal of Sport Finance Blog on 2009-08-18 02:34:10

    More about this item

    Keywords

    underpayment; reserve clause; surplus; free agent;
    All these keywords.

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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