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The Coase Theorem and Player Movement in Major League Baseball

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  • David G. Surdam

    (University of Northern Iowa)

Abstract

The Coase theorem suggests that under certain conditions, the distribution of player talent should be similar before and after free agency. Previous attempts to test the theory's applicability to major league baseball were either examinations of win-loss distributions or comparisons of player movements before and after free agency. These approaches have significant drawbacks. Did the same teams sport winning records over an extended period before and after free agency? Franchise relocations and implementation of a draft of amateur players should have also affected player movement patterns and distributions of win-loss records. American League teams had changes in their win-loss records that do not fully correspond to the theory's predictions, raising questions of what transaction costs might have impeded transferring players. Teams in smaller towns tended to lose talent to teams in larger cities; the flow of talent was roughly similar between periods.

Suggested Citation

  • David G. Surdam, 2006. "The Coase Theorem and Player Movement in Major League Baseball," Journal of Sports Economics, , vol. 7(2), pages 201-221, May.
    • Handle: RePEc:sae:jospec:v:7:y:2006:i:2:p:201-221
    DOI: 10.1177/1527002504266227
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    References listed on IDEAS

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    1. Simon Rottenberg, 1956. "The Baseball Players' Labor Market," Journal of Political Economy, University of Chicago Press, vol. 64(3), pages 242-242.
    2. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    3. Drahozal, Christopher R., 1986. "The impact of free agency on the distribution of playing talent in major league baseball," Journal of Economics and Business, Elsevier, vol. 38(2), pages 113-121, May.
    4. Michael R. Butler, 1995. "Competitive Balance in Major League Baseball," The American Economist, Sage Publications, vol. 39(2), pages 46-52, October.
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    Cited by:

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    2. Robert D. Tollison & Octavian Vasilescu, 2011. "The Designated Hitter Rule and the Distribution of Pitching Talent Across Leagues," Journal of Sports Economics, , vol. 12(4), pages 448-463, August.
    3. Wladimir Andreff, 2009. "Équilibre compétitif et contrainte budgétaire dans une ligue de sport professionnel," Revue économique, Presses de Sciences-Po, vol. 60(3), pages 591-633.
    4. Philip L. Hersch & Jodi E. Pelkowski, 2014. "Does General Manager Networking Affect Choice of Trade Partners in Major League Baseball?," Journal of Sports Economics, , vol. 15(6), pages 601-616, December.
    5. Helmut Dietl & Markus Lang & Johannes Orlowski & Philipp Wegelin, 2023. "The Effect of the Initial Distribution of Labor-Related Property Rights on the Allocative Efficiency of Labor Markets," Working Papers 398, University of Zurich, Department of Business Administration (IBW).

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