Player salary determination

Thomas Miceli ()

Chapter 8 in Topics in Sports Economics, 2025, pp 135-164 from Edward Elgar Publishing

Abstract: This chapter examines the determination of player salaries. It begins by showing that the equilibrium wage in a competitive labor market is equal to a worker's (player’s) marginal revenue product (MRP), or his value to the firm (team). The wage in a monopsonistic market, by contrast, is set below the MRP, resulting in a “wage gap.” This is the case for professional athletes prior to free agency, which they can only attain after being in the league for a certain amount of time. Studies aimed at estimating the wage gap in Major League Baseball (MLB) are reviewed. The chapter then discusses salary determination in the free agent market, the efficacy of holdout threats by players under contract hoping to increase their salaries, and final offer arbitration in the MLB. The chapter concludes by discussing various aspects of the Moneyball hypothesis.

Keywords: Competitive labor market; Monopsonistic labor market; Marginal revenue product; Holdouts; Moneyball; Technological change (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035339389
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