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Free Agency and the Allocation of Labor in Major League Baseball
Author(s) -
Krautmann Anthony C.,
Oppenheimer Margaret
Publication year - 1994
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090150508
Subject(s) - agency (philosophy) , economics , microeconomics , league , coase theorem , function (biology) , nested logit , logit , free market , labour economics , econometrics , law , transaction cost , philosophy , physics , epistemology , astronomy , evolutionary biology , politics , political science , biology
Abstract In this paper we examine the allocation of labor under free agency by developing and testing a model to predict the migration of free agents. Data for individual players are used in a logit model that estimates the probability that a free agent will change teams as a function of several independent variables. Along with other authors, we find that free agents tend to migrate to big cities. In addition, we find evidence that the allocation of labor may be different under free agency than under the reserve clause and suggest a reason why Coase's theorem may not be applicable to this labor market.