nep-spo New Economics Papers
on Sports and Economics
Issue of 2007‒05‒12
two papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. THE Economics of Match-Fixing By Caruso, Raul
  2. The Introduction of the Reserve Clause in Major League Baseball: Evidence of its Impact on Select Player Salaries During the 1880s By Jennifer K. Ashcraft; Craig A. Depken, II

  1. By: Caruso, Raul
    Abstract: The phenomenon of match-fixing does constitute a constant element of sport contests. This paper presents a simple formal model in order to explain it. The intuition behind is that an asymmetry in the evaluation of the stake is the key factor leading to match-fixing. In sum, this paper considers a partial equilibrium model of contest where two asymmetric, rational and risk-neutral opponents evaluate differently a contested stake. Differently from common contest models, agents have the option of choosing a second instrument to affect the outcome of the contest. The second instrument is assumed to capture positive investments in ‘contest management’ – namely efforts paving the way for a match-fixing. In particular, it will be demonstrated that, under some conditions, an asymmetry in the evaluation of the stake can lead to a concession from one agent to the other and then to a match-fixing. Eventually the intuitions and results of the model will be applied to make a comparison between the FIFA World Cup and the UEFA Champions League tournaments.
    Keywords: Contest; Football; Sport Contest; Contest Management; Match-Fixing; Asymmetry in evaluation; Concession; FIFA; UEFA; CHampions League; World Cup.
    JEL: L83 D73
    Date: 2007–05
  2. By: Jennifer K. Ashcraft (Burlington Northern-Santa Fe Railway Company); Craig A. Depken, II (Department of Economics, University of Texas at Arlington)
    Abstract: This paper investigates the introduction of the reserve clause in Major League Baseball during the 1880s. Taking advantage of a unique data set describing the salaries for twenty nine high-quality players throughout the decade of the 1880s, we investigate the impact of the reserve clause as it evolved from a "gentleman's agreement" to a formal contract stipulation. We test three specific hypotheses concerning the reserve clause: its effect on average salaries, on the remuneration to marginal product, and the premium paid to a player for changing teams. The evidence suggests that introducing the reserve clause reduced average salaries and the premium for changing teams; detectable monopsony power was transferred to team owners almost immediately. However, there was no statistically significant impact of the reserve clause on how much players were paid for their marginal product. The empirical results indicate that reserve clause shifted considerable monopsony power to team owners immediately after it was instituted.
    Keywords: Sports economics, monopsony, free agency, negotiation
    JEL: J31 J42 L83
    Date: 2007–04

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