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Salary Arbitration and Pre-Arbitration Negotiation in Major League Baseball

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  • David J. Faurot
  • Stephen McAllister

Abstract

Two assumptions in this analysis of baseball salary arbitration are that (1) players and clubs, to serve their interests in pre-arbitration negotiation, submit final offers to maximize and minimize, respectively, the expected value of the arbitrator's decision, and (2) arbitrators whose decisions are predictably biased are not appointed to settle player disputes, because such arbitrators are vetoed by one or the other side. These assumptions allow the authors to estimate the effects of several variables on arbitrators' decisions in 1984–91 cases. They find statistically significant effects for four variables that the industry's collective bargaining agreement identifies as matters arbitrators should consider—the player's performance during the previous season, the length and consistency of the player's career performance, previous compensation, and the club's recent performance—and for one variable not mentioned in that agreement—player position.

Suggested Citation

  • David J. Faurot & Stephen McAllister, 1992. "Salary Arbitration and Pre-Arbitration Negotiation in Major League Baseball," ILR Review, Cornell University, ILR School, vol. 45(4), pages 697-710, July.
    • Handle: RePEc:sae:ilrrev:v:45:y:1992:i:4:p:697-710
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    Cited by:

    1. Alan Speight & Dennis Thomas, 1997. "Arbitrator Decision‐Making in the Transfer Market: an Empirical Analysis," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(2), pages 198-215, May.
    2. Hamermesh, Daniel S. & Pfann, Gerard, 2009. "Markets for Reputation: Evidence on Quality and Quantity in Academe," CEPR Discussion Papers 7603, C.E.P.R. Discussion Papers.
    3. Phillip A. Miller, 2000. "A Theoretical and Empirical Comparison of Free Agent and Arbitration‐Eligible Salaries Negotiated in Major League Baseball," Southern Economic Journal, John Wiley & Sons, vol. 67(1), pages 87-104, July.
    4. James Lambrinos & Thomas D. Ashman, 2007. "Salary Determination in the National Hockey League Is Arbitration Efficient?," Journal of Sports Economics, , vol. 8(2), pages 192-201, May.
    5. Kenneth H. Brown & Lisa K. Jepsen, 2009. "The Impact of Team Revenues on MLB Salaries," Journal of Sports Economics, , vol. 10(2), pages 192-203, April.
    6. Daniel R. Marburger & Paul L. Burgess, 2004. "Can Prior Offers and Arbitration Outcomes Be Used to Predict the Winners of Subsequent Final‐Offer Arbitration Cases?," Southern Economic Journal, John Wiley & Sons, vol. 71(1), pages 93-102, July.
    7. John W. Budd & Aaron Sojourner & Jaewoo Jung, 2017. "Are Voluntary Agreements Better? Evidence from Baseball Arbitration," ILR Review, Cornell University, ILR School, vol. 70(4), pages 865-893, August.
    8. John Fizel & Anthony C. Krautmann & Lawrence Hadley, 2002. "Equity and arbitration in major league baseball," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(7), pages 427-435.
    9. J. Richard Hill & Nicholas A. Jolly, 2014. "Negotiated Settlement Under Mlb Final-Offer Salary Arbitration System," Contemporary Economic Policy, Western Economic Association International, vol. 32(2), pages 533-543, April.
    10. David J. Faurot, 2001. "Equilibrium Explanation of Bargaining and Arbitration in Major League Baseball," Journal of Sports Economics, , vol. 2(1), pages 22-34, February.
    11. Lawrence Hadley & John Ruggiero, 2006. "Final-offer arbitration in major league baseball: A nonparametric analysis," Annals of Operations Research, Springer, vol. 145(1), pages 201-209, July.

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