Salary Arbitration and Pre-Arbitration Negotiation in Major League Baseball

Abstract

Two assumptions in this analysis of baseball salary arbitration are that (1) players and clubs, to serve their interests in pre-arbitration negotiation, submit final offers to maximize and minimize, respectively, the expected value of the arbitrator's decision, and (2) arbitrators whose decisions are predictably biased are not appointed to settle player disputes, because such arbitrators are vetoed by one or the other side. These assumptions allow the authors to estimate the effects of several variables on arbitrators' decisions in 1984–91 cases. They find statistically significant effects for four variables that the industry's collective bargaining agreement identifies as matters arbitrators should consider—the player's performance during the previous season, the length and consistency of the player's career performance, previous compensation, and the club's recent performance—and for one variable not mentioned in that agreement—player position.