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

25 Pages Posted: 6 Dec 2015

See all articles by Brad R. Humphreys

Brad R. Humphreys

West Virginia University - Department of Economics

Hyunwoong Pyun

West Virginia University - Department of Economics

Date Written: November 30, 2015

Abstract

Some professional athletes still face monoposony power in labor markets, underscoring the importance of estimating players' marginal revenue product (MRP) 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 MRP estimation, and calculate Monoposony 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.

Keywords: monoposony salary exploitation, Major League Baseball, marginal revenue product

JEL Classification: J24, J42, J52, L13, L40, Z22

Suggested Citation

Humphreys, Brad R. and Pyun, Hyunwoong, Monopsony Exploitation in Professional Sport: Evidence from Major League Baseball Position Players, 2000-2011 (November 30, 2015). Available at SSRN: https://ssrn.com/abstract=2699246 or http://dx.doi.org/10.2139/ssrn.2699246

Brad R. Humphreys (Contact Author)

West Virginia University - Department of Economics ( email )

Morgantown, WV 26506
United States

Hyunwoong Pyun

West Virginia University - Department of Economics ( email )

Morgantown, WV 26506
United States

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