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Strategic Free Agency in Baseball

Author

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  • Duane W. Rockerbie

    (The University of Lethbridge, rockerbie@uleth.ca)

Abstract

This article investigates whether a greater supply of free-agent baseball players at a particular position has any effect on negotiated salaries. A simple auction model of free-agent salaries with many bidders is developed that suggests that a greater supply of positional free-agent players should lower the path of winning bids in sequential player auctions. A drop in the valuation of the marginal bidder in a sequence of player auctions also drops the path of winning bids. There may be an incentive to defer free agency by including an option year in a player contract. The effect of the number of free agents on salaries is tested using free-agent salary settlements for the 1997-2002 seasons.

Suggested Citation

  • Duane W. Rockerbie, 2009. "Strategic Free Agency in Baseball," Journal of Sports Economics, , vol. 10(3), pages 278-291, June.
    • Handle: RePEc:sae:jospec:v:10:y:2009:i:3:p:278-291
    DOI: 10.1177/1527002508329859
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    References listed on IDEAS

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    1. Thomas Kittsteiner & Jörg Nikutta & Eyal Winter, 2004. "Declining valuations in sequential auctions," International Journal of Game Theory, Springer;Game Theory Society, vol. 33(1), pages 89-106, January.
    2. Alan Beggs & Kathryn Graddy, 1997. "Declining Values and the Afternoon Effect: Evidence from Art Auctions," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 544-565, Autumn.
    3. Krautmann, Anthony C, 1999. "What's Wrong with Scully-Estimates of a Player's Marginal Revenue Product," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 369-381, April.
    4. Scully, Gerald W, 1974. "Pay and Performance in Major League Baseball," American Economic Review, American Economic Association, vol. 64(6), pages 915-930, December.
    5. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    6. Michael A. Leeds & Sandra Kowalewski, 2001. "Winner Take All in the NFL," Journal of Sports Economics, , vol. 2(3), pages 244-256, August.
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    Cited by:

    1. Duane W. Rockerbie, 2024. "Does the Dual Representation System of Player Agents in International Football Benefit Players? An Economic Analysis," Journal of Sports Economics, , vol. 25(7), pages 827-843, October.

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