Labor Relations Commons^™

Boom & Bust: The Perils Of Guaranteed Long Term Contracts. Evidence From Ops100 Performance Over The Contract Cycle, Heather M. O'Neill

Business and Economics Faculty Publications

This study focuses on panel data of 256 MLB free agent hitters under the 2006-2011 Collective Bargaining Agreement (CBA) to demonstrate that hitters, on average, increase their offensive production, measured by OPS100, during the last year of their contract and subsequently underperform the first year of the newly signed long term contract. The contract year phenomenon arises from the incentive to land a lucrative guaranteed contract for players not intending to retire. Signing a long term guaranteed contract creates an incentive to shirk (underperform) the first year of the new contract because performance and pay become unlinked and the need …

Do Hitters Boost Their Performance During Their Contract Years?, Heather M. O'Neill

Business and Economics Faculty Publications

Each season, baseball fans and journalists alike identify which players are in the final years of their contracts because a lot rides on how the players produce in their “contract year.” Will a player boost his effort and performance in an effort to improve his value and bargaining power? Or will he crumble under the pressure? Or are players’ performances uncorrelated with where they stand in their contract cycles?

Do Mlb Hitters Boost Performance In Their Contract Year?, Heather M. O'Neill

Business and Economics Faculty Publications

This study focuses on 256 MLB free agent hitters playing under the 2006-2011 CBA to determine whether they boost their offensive performance in their contract year. Prior studies’ results are mixed, depending on the econometric technique used and the choice of the offensive performance measure.

Having multiple year observations per player, one can incorporate the unobserved traits of the players (ability, risk aversion, work ethic, etc.) by using Fixed Effects (FE) estimation. Since these unmeasured player traits are likely to be correlated with observed predictors of performance (games played, playoff contention, age, etc.), traditionally used Ordinary Least Squares (OLS) and …

Do Major League Baseball Hitters Engage In Opportunistic Behavior?, Heather M. O'Neill

Business and Economics Faculty Publications

This study focuses on 256 Major League Baseball free agent hitters playing under the 2006–2011 collective bargaining agreement to determine whether players engage in opportunistic behavior in their contract year, i.e., the last year of their current guaranteed contracts. Past studies of professional baseball yield conflicting results depending on the econometric technique applied and choice of performance measure. When testing whether players’ offensive performances increase during their contract year, the omitted variable bias associated with OLS and pooled OLS estimation leads to contrary results compared to fixed effects modeling. Fixed effects regression results suggest players increase their offensive performance subject …

Do Major League Baseball Hitters Come Up Big In Their Contract Year?, Heather M. O'Neill, Matthew J. Hummel

Business and Economics Faculty Publications

In sports, especially baseball, there is a lot of talk about contract year performance. Beginning in spring training and continuing throughout the season, sports journalists and fans converse about how players in the last year of their contract will perform. Experts in the media, often ex-baseball players themselves, speculate contract year players will have break-out seasons in order to secure a better contract in upcoming contract negotiations. This leads to the question: do baseball players increase their effort and performance during their contract year to increase the value of their next contract?