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INFORMATION TO USERS This manuscript has been reproduced from the microfilm master. UMI films the text directly from the original or copy submitted. Thus, some thesis and dissertation copies are in typewriter free, while others may be from any type of computer printer. The quality of this reproduction is dependent upon the quality of the copy submitted. Broken or indistinct print, colored or poor quality illustrations and photographs, print bleedthrough, substandard margins, and improper alignment can adversely afreet reproduction. In the unlikely event that the author did not send UMI a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyright material had to be removed, a note will indicate the deletion. Oversize materials (e.g., maps, drawings, charts) are reproduced by sectioning the original, beginning at the upper left-hand comer and continuing from left to right in equal sections with small overlaps. Each original is also photographed in one exposure and is included in reduced form at the back of the book. Photographs included in the original manuscript have been reproduced xerographically in this copy. Higher quality 6” x 9” black and white photographic prints are available for any photographs or illustrations appearing in this copy for an additional charge. Contact UMI directly to order. UMI A Beil & Howell Information Company 300 North Zed) Road, Ann Arbor MI 48106-1346 USA 313/761-4700 800/521-0600 SPORTS LABOR MARKETS: USING BASEBALL CARD PRICES TO MEASURE STAR QUALITY AND QUANTIFY MONOPSONISTIC EXPLOITATION DISSERTATION Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of The Ohio State University By Charles Jeffrey MuUin, M. A. ***** The Ohio State University 1997 Dissertation Committee: Approved by Professor Lucia Dunn, Adviser Professor Stephen Cosslett Adviser Professor Stephen Cecchetti Economics Department UMI Number: 9731682 UMI Microform 9731682 Copyright 1997, by UMI Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. UMI 300 North Zeeb Road Ann Arbor, Ml 48103 ABSTRACT This research uses a new source of market price information to explore the issue of monopsonistic exploitation in sports labor markets. It will examine monopsonistic exploitation in Major League Baseball by using baseball card prices to measure a player’s star quality, a heretofore unmeasured part of a player’s marginal revenue product. Calculating MRP’s using performance measures and star quality measures allows us to obtain a more accurate calculation of a player’s true marginal revenue product than has been computed in previous studies. Complete time series data exist for baseball card prices for all players. Presumably these card prices reflect more accurately the fan-appeal of a player and his ability to influence team revenues. We model this connection by first regressing card prices on various player performance statistics. We take the residual firom this equation to represent a player’s non-performance appeal, or star quality, and use the residual as a key independent variable along with traditional team and market variables in an explanatory model of team attendance. We then use these estimates to calculate marginal revenue products for players in each of the years fi'om 1990-1993. Comparison of these estimates with actual salaries determines rates of exploitation for baseball players. We then compare exploitation rates for players based on position, performance, fi’ee agency status, team market size and race, in addition, we generate lists of top revenue producing players, most underpaid players, and most overpaid players. These examinations allow us to determine the eflSciency of a labor market with perfect mobility. Results indicate that free agents receive a much greater percentage of their marginal revenue product, an outcome that is predicted for competitive markets in a neo-classical model. We also find that hitters are significantly more exploited than pitchers. Finally, we find that teams that operate in larger markets are significantly more exploitive than teams that operate in smaller markets. These results are particularly interesting as many of these issues have been of special concern to both labor and management in Major League Baseball since the labor dispute of 1994. m Dedicated to both Carmen M. Berardi and my Father, whose respective patience and advice are as never-ending as this document. IV ACKNOWLEDGMENTS I wish to thank most of all my adviser, Lucia Dunn, for the imagination, support, and guidance which made this effort possible. I wish to thank also Stephen Cosslett, for his econometric genius and his SAS wizardry. I wish to thank Stephen Cecchetti, for his generous offer to join the team in the bottom of the ninth. I wish to thank Geoffrey Bump, for his computer help and his odd but never-ending sense of humor. VTTA September 19,1967 .................................................. Bom - Scranton, Pennsylvania June, 1989.................................................................B.S. Mathematics, Indiana University of Pennsylvania 1991.......................................................................... M.A. Economics, The Ohio State University 1991 - present............................................................Graduate Teaching Associate, The Ohio State University FIELDS OF STUDY Major Field; Economics VI TABLE OF CONTENTS Page Abstract........................................................................................................................... ü Dedication....................................................................................................................... iv Acknowledgments............................................................................................................v Vita..................................................................................................................................vi List of Figures................................................................................................................. ix List of Tables................................................................................................................... x Chapters: 1. Introduction.........................................................................................................1 2. Literature review - baseball cards........................................................................3 3. Literature review - monopsonistic exploitation...................................................6 4. Literature review - additional issues..................................................................18 5. The model......................................................................................................... 26 6. Aggregate results...............................................................................................38 7. Individual player results.................................................................................... 58 8. Conclusions....................................................................................................... 86 9. The data............................................................................................................ 90 List of references..........................................................................................................95 v ii Page Appendix A. Regression results.................................................................................... 98 Appendix B. List of teams and their market size........................................................101 VUl LISTOFnGURES Figure Page 3.1 Equilibrium in a monopsony labor market..............................................7 IX LIST OF TABLES Table Pape 6.1 Relationship between MRP and salary: Total sample and sub-populations....................................................................................... 39 6.2 HITTERS - Average MRP and salary for free agents and non-free agents....................................................................................... 42 6.3 PITCHERS - Average MRP and salary for free agents and non-free agents....................................................................................... 43 6.4 Effects of position, performance, and free agency status on exploitation rates...............................................................................45 6.5 Exploitation rates of large market teams vs. small market teams by position and free agency status. See APPENDIX B for a list of teams and their SMSA populations...................................................47 6.6 Exploitation rates of large market teams vs. medium market teams vs. small market teams by position and free agency status. See APPENDIX B for a list of teams and their SMSA populations............ 48 6.7 Exploitation rates of white players and non-white players by free agency status and position..........................................................51 6.8 Exploitation rates of white, African-American, and Hispanic players by free agency status and position............................................. 53 6.9 Average Star Quality by race/ethnicity and position............................... 55 6.10 Star Quality by market size ......................................................................56 7.1 Top twenty star quality revenue hitters from 1990-1993........................59 Table Page 7.2 Top