Phillip A. Miller

According to baseball’s collective bargaining agreement, arbitrators may not consider team finances when rendering a decision. The author develops two theories to examine the setting of final offers. In the first theory, final offers are simply functions of the arbitral criteria and are, therefore, not a function of the revenue-generating capability of the team. In the second theory, the author argues that teams may trade some talented and, thus, high-priced arbitration ineligible players, resulting in an implicit premium embedded in the final offers. The empirical analysis suggests that...Read more