Financial Restraint in the Free Agent Labor Market for Major League Baseball: Players Look at Strike Three

Professional baseball has provided economists with a wealth of issues and data over the years. Research in this area has been particularly productive because the pay and marginal revenue products of the players are easily measured. The principal issues have been salaries, the player pension fund, and the negotiating opportunities of players who are classified as free agents. In this study we examine the salary consequences of the baseball owners' boycott of the free agents market for players following the 1985 and 1986 seasons. In 1987 baseball arbitrator Thomas Roberts ruled that baseball team owners had violated baseball's Basic Agreement by colluding in the free agent market for baseball players. The owners, in an effort to exercise financial restraint, did not bid on eligible free agents after the 1985 season (unless the former team was no longer interested in the player). In 1988 baseball arbitrator George Nicolau ruled that the owners once again boycotted the free agent market following the 1986 season.