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Palgrave Macmillan

Contract Options for Buyers and Sellers of Talent in Professional Sports

  • Book
  • © 2020

Overview

Authors:
  1. Duane W Rockerbie

    1. Department of Economics, University of Lethbridge, Lethbridge, Canada

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  2. Stephen T. Easton

    1. Department of Economics, Simon Fraser University, Burnaby, Canada

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    You can also search for this author in PubMed   Google Scholar

  • Examines salary formation in Major League Baseball in the light of real option theory
  • Seeks to clarify the connections between salary and marginal revenue product for professional baseball players
  • Demonstrates how to calculate the value of real options to the baseball player and the team owner

Part of the book series: Palgrave Pivots in Sports Economics (PAPISE)

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Table of contents (5 chapters)

  1. Front Matter

    Pages i-xi
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  2. On the Rise: Player Compensation and Multi-year Contracts

    • Duane W Rockerbie, Stephen T. Easton
    Pages 1-21

  3. The Puzzle of Overpaid and Underpaid Players

    • Duane W Rockerbie, Stephen T. Easton
    Pages 23-52

  4. Contract Options for Buyers and Sellers of Talent

    • Duane W Rockerbie, Stephen T. Easton
    Pages 53-67

  5. Extensions to the Put Option Model

    • Duane W Rockerbie, Stephen T. Easton
    Pages 69-83

  6. Concluding Remarks

    • Duane W Rockerbie, Stephen T. Easton
    Pages 85-91

  7. Back Matter

    Pages 93-97
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Keywords

About this book

This Palgrave Pivot re-examines salary formation in Major League Baseball in light of real option theory to clarify the connection between salary and marginal revenue product for professional baseball players. Current literature has tended to treat single-year and multi-year contracts similarly, ignoring the potential option value for teams and for players. Recent work points to the observation that both high-productivity and low-productivity athletes have salaries that systematically differ from their marginal revenue product, and that free agents signing multi-year contracts are overpaid relative to free agents signing one-year contracts. This book argues that the value of signing an athlete to a contract should be determined similarly to the determination of the value of an investment project or a financial asset. This book demonstrates how to calculate the value of real options to the player and the team owner with a simple two-year contract, and offers extensions to the realoptions model for multiyear contracts or when a player is early or late in his career.

Authors and Affiliations

  • Department of Economics, University of Lethbridge, Lethbridge, Canada

    Duane W Rockerbie

  • Department of Economics, Simon Fraser University, Burnaby, Canada

    Stephen T. Easton

About the authors

Duane W. Rockerbie is Professor in the Department of Economics at the University of Lethbridge, Canada. He is a member of the editorial board of the Journal of Sports Economics and is a past Vice-President of the North American Association of Sports Economists (NAASE).

Stephen T. Easton is Professor in the Department of Economics at Simon Fraser University, Canada, 

Bibliographic Information

  • Book Title: Contract Options for Buyers and Sellers of Talent in Professional Sports

  • Authors: Duane W Rockerbie, Stephen T. Easton

  • Series Title: Palgrave Pivots in Sports Economics

  • DOI: https://doi.org/10.1007/978-3-030-49513-8

  • Publisher: Palgrave Macmillan Cham

  • eBook Packages: Economics and Finance, Economics and Finance (R0)

  • Copyright Information: The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2020

  • Hardcover ISBN: 978-3-030-49512-1Published: 13 September 2020

  • eBook ISBN: 978-3-030-49513-8Published: 12 September 2020

  • Series ISSN: 2662-6438

  • Series E-ISSN: 2662-6446

  • Edition Number: 1

  • Number of Pages: XI, 97

  • Number of Illustrations: 8 b/w illustrations, 1 illustrations in colour

  • Topics: Sports Economics, Labor Economics, Econometrics

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