Risk-Averse Team Owners and Players’ Salaries in Major League Baseball

Anthony C. Krautmann

Journal of Sports Economics, 2017, vol. 18, issue 1, 19-33

Abstract: This article looks at the role an owner’s attitude toward risk plays in his salary bids for free agents in Major League Baseball. We show that risk-averse owners will pay a premium for consistency on the field. Our empirical results are consistent with the hypothesis that a free agent’s contract terms are negatively related to the degree of variability in his performance. To the extent that our results carry over to all players, this suggests a heretofore unrecognized factor affecting the market for talent in professional sports.

Keywords: risk aversion; player salaries; Major League Baseball (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:jospec:v:18:y:2017:i:1:p:19-33

DOI: 10.1177/1527002514560577

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