Did Collusion Adversely Affect Outcomes in the Baseball Player's Labor Market?: A Panel Study of Salary Determination from 1986 to 1992
Timothy R. Hylan, Maureen J. Lage, and Michael Treglia
Does anyone who thinks about it for one minute believe that ballplayers voluntarily played for less than they were worth, or that owners fought for one hundred years to keep the reserve rule because of idealism and not because of a profit motive?-- Marvin Miller , A Whole Different Ballgame
One of the most notable characteristics of the employment relationship in professional baseball has been continuing conflict between the players and team owners. Although there have been numerous points of contention between labor and management in this industry, the main issue separating the two sides has been the distribution of the rents that are generated by selling viewing rights to the contests. In an early effort to restrain labor's share of these rents, the owners imposed a contract provision known as the reserve clause to "protect" certain players on each team, that is, beginning in 1879, other teams were prevented from enticing the protected players away from the original team through higher salary offers. By establishing monopsony power over players, the reserve clause enabled team owners to keep labor costs relatively low.
Two of the important institutional innovations that weakened the reserve clause were the 1973 implementation of final offer salary arbitration for players with at least three years of Major League Baseball (MLB) experience, and the 1976 advent of free agency for players with at least six years of service. Given the behavior of the arbitrator, final offer salary arbitration is expected to reduce the monopsonistic power of the team owner and, thus, increase baseball players' bargaining power and their salaries. 1 In fact, these expectations were borne out. 2
Burgess and Marburger ( 1992) found that starting pitchers who were eligible for final offer salary arbitration were paid 89% more than arbitration ineligible starting