A Principal-Agent Model of Contracting in Major League Baseball

Thomas Miceli

No 2003-01, Working papers from University of Connecticut, Department of Economics

Abstract: Traditional economic analyses of the reserve clause in major league baseball view it as having arisen from the superior bargaining of owners compared to players. This article interprets it instead as promoting efficient investment by teams in player development, given the transferability of player skills to other teams. Using a principal-agent framework, the article shows that limited player mobility emerges as part of the optimal contract between players (principals) and teams (agents).

Pages: 14 pages
Date: 2003-01
New Economics Papers: this item is included in nep-ind
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