Equity and arbitration in major league baseball

John Fizel, Anthony Krautmann and Lawrence Hadley
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John Fizel: Penn State-Erie, USA, Postal: Penn State-Erie, USA
Lawrence Hadley: University of Dayton, USA, Postal: University of Dayton, USA

Managerial and Decision Economics, 2002, vol. 23, issue 7, 427-435

Abstract: Equity theory argues that workers examine their job performance and salaries relative to workers in comparable situations. If compensation is inequitable, workers may adjust their behavior. We test the hypothesis that an arbitration-eligible player in Major League Baseball is more likely to file for arbitration and|or proceed to an arbitration hearing if he feels he is underpaid relative to his comparison other. Bivariate probit is used to increase efficiency and correct for the sample bias in estimating decision models within the two-step arbitration process. The results indicate that equity is a significant predictor of a player's unilateral decision to file but is an insignificant determinant of going to a hearing because of offsetting responses to equity by player and owner. Copyright © 2002 John Wiley & Sons, Ltd.

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:23:y:2002:i:7:p:427-435

DOI: 10.1002/mde.1090

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