Are Voluntary Agreements Better? Evidence from Baseball Arbitration

[We’re pleased to welcome author John W. Budd of the University of Minnesota. Budd recently published an article in the ILR Review entitled “Are Voluntary Agreements Better? Evidence from Baseball Arbitration,” which is currently free to read for a limited time. Below, Budd reflects on the inspiration for conducting this research:]

Coaches Umpires Pre-game Meeting BaseballThink of a dispute you’ve had with a person or entity that you have an ongoing relationship with, like a business, employer, co-worker, or neighbor. Was that dispute resolved between the two of you, or did it involve a third-party determination by a judge, arbitrator, superior, or some other authority? Do you think it mattered how the dispute was resolved? Would your behavior have changed if it was resolved differently?

Conflict resolution professionals and academics have long believed that voluntarily-negotiated agreements produce better long-run relationships than third-party imposed resolutions. This is because the participants can control their own destiny, tailor agreements to their liking, and feel greater ownership in the process and the outcome. Sounds sensible. But there is very little evidence beyond the parties feeling satisfied immediately after resolution. Maybe a formal procedure like a courtroom or arbitration hearing provides greater levels of due process, or the process doesn’t really matter for a long-term relationship because people forget what happened. The motivation for our research in “Are Voluntary Agreements Better? Evidence from Baseball Arbitration” is to provide evidence on this conventional wisdom, and to hopefully spur others to rigorously analyze this important issue in other settings.

Perhaps one reason why there is not much evidence on the long-term effects of dispute resolution mechanisms is that it’s challenging to find research settings in which the same type of dispute is resolved in different ways and in which the long-term effects can be consistently measured. We identified Major League Baseball as a compelling setting for these analyses because individual performance is well measured, the possibility of relationship breakdown is quite real, the negotiation and arbitration events are uniform and comparable across players, and both voluntary and imposed resolutions are routinely observed. Baseball players with between three (sometimes two) and six years of service are eligible for salary arbitration with their current team. In any given year, some go to arbitration while many settle voluntarily. If voluntarily-negotiated agreements are meaningfully better, then in the following season we would expect to see better on-field performance and more lasting relationships for those who voluntarily reached a salary agreement compared to those who went to arbitration and had a new salary imposed on them.

Using 24 years of data comparing players who arbitrated with those who settled just before arbitrating, we find partial support for the conventional wisdom. We find that relationships are more durable when the player and club negotiate a new salary rather than having a salary imposed by an arbitrator. Specifically, arbitration nearly doubles the likelihood of a player not being with the same team at the end of the season. But there are no statistically significant differences in on-field performance between players who go to arbitration and those who settle voluntarily. This might be due to longer-term career concerns. Most arbitration-eligible players are early in their careers and their on-field performance is visible to other clubs. So they have incentives to set aside any residual feelings from the dispute-resolution process and to perform at a high level in order to position themselves for a lucrative, subsequent contract.

This pattern of results is consistent with scenarios in which the arbitration process harms the player-club relationship and negatively affects player behaviors that are hard to observe (e.g., clubhouse attitude, loyalty to the team), but career concerns and/or loyalty to teammates and fans causes a player to continue to publicly perform at his usual level. Such a scenario can be generalized into an hypothesis that could be applied to other settings—that is, the effect of a dispute resolution procedure will be smaller on dimensions of performance that are valued and easily observed by potential, future partners and larger where performance is harder for future potential partners to observe.

While the data come from the context of professional baseball, these results are important for dispute resolution researchers and practitioners with implications beyond professional baseball. The claimed superiority of voluntary dispute resolution procedures is neither uniformly rejected nor supported. Additional research and perhaps some re-thinking of longstanding assumptions are therefore needed.

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Ready, Set, Scholarship! How Athletes Weigh Their College Decisions

3013194880_4d3049b313_z.jpgIt’s no secret that high-performing high school athletes are offered college scholarships as a recruiting tactic, from sports varying from football, to swimming, to volleyball. With most every college student applying for and in need of financial aid, sometimes the scholarship stipend could secure a student’s acceptance, even if the school isn’t his or her top choice.

The National Collegiate Athletic Association is now allocating even more financial aid to athletes since 2015, that covers more than just tuition, room, and board–it can now cover the cost of transportation and other university fees. A recent study in the Journal of Sports Economics  outlines these costs, and how athletes are positively swayed to accept the biggest scholarship offered. The article, “Full Cost-of-Attendance Scholarships and College Choice: Evidence From NCAA Football,” co-authored by John C. Bradbury and Joshua Pitts, is free to read for a limited time.

The abstract for their article is below:

In 2015, the National Collegiate Athletic Association Division I schools were permitted to cover the “full cost of attendance” as a part of athletic scholarships for the first time, which allowed schools to provide modest living stipends to its athletes. Differences in cost-of-attendance allotments across schools have the potential to affect the allocation of talent, with higher stipends attracting better student-athletes. Using recently published cost-of-attendance data, we estimate the impact of cost-of-attendance allowances on college football recruiting. Estimates reveal that cost-of-attendance scholarship allowances were positively associated with football recruiting quality immediately following their implementation, indicating that the modest differences in stipends swayed student-athletes’ college choice.

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Football photo attributed to Jamie Williams (CC). 

Is it a ‘home run’ for vertical integration? Organizational Form in Professional Baseball

At first glance, the organizational form of major league and minor league baseball teams may appear straightforward–minor league teams provide training and experience for players, which provides major league teams with a strong recruitment pool. However, a recent paper published in the Journal of Sports Economics by F. Andrew Hanssen, James W. Meehan Jr., and Thomas J. Miceli, entitled “Explaining Changes in Organizational Form: The Case of Professional Baseball,” the authors suggest that the relationship between major league and minor league baseball teams is more dynamic than previously thought.

The abstract for the paper:

In this articleCurrent Issue Cover, we investigate changes over time in the organization of the relationship between Major League Baseball and minor league baseball teams. We develop a model in which a minor league team serves two functions: talent development and local entertainment. The model predicts different modes of organizing the relationship between majors and minors based on the value of these parameters. We then develop a discursive history. Consistent with the model’s predictions, we find that when the value of minor league baseball’s training function was low but the value of its entertainment function was high, major and minor league franchises operated independently, engaging in arms’-length transactions. However, as the training function became more important and the local entertainment function less important, formal agreements ceded control of minor league functions to major league franchises. Finally, as the value of local entertainment rose once again in the late 20th century, the two roles were split, with control of local functions accruing to local ownership and training functions to major league teams. This analysis helps shed light on factors that influence the boundaries of the firm.

 

The Dynamic Relationship Between Minor League and Major League Baseball

18683790574_271a262a88_zAt first glance, the organizational form of major league and minor league baseball teams may appear straightforward–minor league teams provide training and experience for players, which provides major league teams with a strong recruitment pool. However, a recent paper published in the Journal of Sports Economics by F. Andrew Hanssen, James W. Meehan Jr., and Thomas J. Miceli, entitled “Explaining Changes in Organizational Form: The Case of Professional Baseball,” the authors suggest that the relationship between major league and minor league baseball teams is more dynamic than previously thought. The abstract for the paper:

In this article, we investigate changes over time in the organization of the relationship between Major League Baseball and minor league baseball teams. We develop a model in which a minor league team serves two functions: talent development and local entertainment. The model predicts different modes of Current Issue Coverorganizing the relationship between majors and minors based on the value of these parameters. We then develop a discursive history. Consistent with the model’s predictions, we find that when the value of minor league baseball’s training function was low but the value of its entertainment function was high, major and minor league franchises operated independently, engaging in arms’-length transactions. However, as the training function became more important and the local entertainment function less important, formal agreements ceded control of minor league functions to major league franchises. Finally, as the value of local entertainment rose once again in the late 20th century, the two roles were split, with control of local functions accruing to local ownership and training functions to major league teams. This analysis helps shed light on factors that influence the boundaries of the firm.

You can read “Explaining Changes in Organizational Form: The Case of Professional Baseball” from Journal of Sports Economics free for the next two weeks by clicking here. Want to stay current on all of the latest research from Journal of Sports EconomicsClick here to sign up for e-alerts!

Do New Sports Facilities Prompt New Business in Local Communities?

14962586954_71434f3054_zHow well do new sports facilities promote economic growth in a community? Recently published in the Journal of Sports Economicsthe article “Do New Sports Facilities Attract New Businesses?” from authors Kaitlyn Harger, Brad Humphreys, and Amanda Ross seeks to answer this question by analyzing how many new businesses open following the opening a new sports facility in a community. The abstract for the paper:

We examine the impact of new sports facilities on new businesses, an unexplored Current Issue Covertopic in the literature. We use data from the Dun and Bradstreet MarketPlace files to examine how new sports facilities affect nearby business activity in terms of the number of new businesses and workers. We find no evidence of increased new businesses openings after the opening of new sports facilities in 12 U.S. cities in the 2000s; employment at new businesses near new facilities is larger than at new businesses elsewhere in the metropolitan statistical area; this increase cannot be linked to businesses in any specific industry.

You can read “Do New Sports Facilities Attract New Businesses?” from Journal of Sports Economics free for the next two weeks by clicking here. Want to know all about the latest research from Journal of Sports EconomicsClick here to sign up for e-alerts!

Introducing the New Editor of Journal of Sports Economics!

CoatesWe’re pleased to welcome the new editor of Journal of Sports Economics, Dennis Coates! Dr. Coates graciously provided us with some information on his background:

Dennis Coates is Professor of Economics at University of Maryland, Baltimore. He received his Ph.D. in economics from the University of Maryland, College Park and was on the faculty of the University of North Carolina-Chapel Hill before moving to UMBC in 1995.

His research focuses on political economy and public policy issues with emphasis on sport and sports economics topics and has appeared in journals such as International Journal of Sport Finance, European Journal of Political Economy, and Eastern Economic Review.

He is on the editorial boards of the International Journal of Sport Finance, the Journal of Sport Management, and several other journals. He was the founding president of the North American Association of Sports Economics.

JSE__.inddJournal of Sports Economics publishes scholarly research in the field of sports economics. The aim of the journal is to further research in the area of sports economics by bringing together theoretical and empirical research in a single intellectual venue. Relevant topics include: labor market research; labor-management relations; collective bargaining; wage determination; local public finance; and other fields related to the economics of sports. Published quarterly, the Journal of Sports Economics is unique in that it is the only journal devoted specifically to this rapidly growing field. In honor of Dr. Coates new editorship, you can read the current issue of Journal of Sports Economics for free for the next two weeks by clicking here!

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Is There a Spike in Crime on NFL Game Days?

football-531240-mSan Francisco Police were out in force February 3, 2013. Having witnessed chaos after the Giants won the World Series months before, authorities were concerned about the response 49ers fans would have to their team playing in the Super Bowl. Fortunately, disappointed fans created only minor problems. Baltimore police, on the other hand, were less fortunate as Raven’s fans rioted in the street, overturned cars and even looted. So just how common is crime in a team’s home city on pro-football game days? Authors David E. Kalist and Daniel Y. Lee explored this topic in their article “The National Football League: Does Crime Increase on Game Day?” from Journal of Sports Economics.

This article investigates the effects of National Football League (NFL) games on JSE__.inddcrime. Using a panel data set that includes daily crime incidences in eight large cities with NFL teams, we examine how various measurements of criminal activities change on game day compared with nongame days. Our findings from both ordinary least squares and negative binomial regressions indicate that NFL home games are associated with a 2.6% increase in total crimes, while financially motivated crimes such as larceny and motor vehicle theft increase by 4.1% and 6.7%, respectively, on game days. However, we observe that play-off games are associated with a decrease in financially motivated crimes. The effects of game time (afternoon vs. evening) and upset wins and losses on crime are also considered.

You can read “The National Football League: Does Crime Increase on Game Day?” from Journal of Sports Economics for free by clicking here. Did you know you can have research like this sent directly to your inbox? Just click here to sign up for e-alerts!