Mark Tudor

Publication Date

11-1993

Advisor(s) - Committee Chair

Daniel Myers, John Wassom, Brian Goff, Thomas Wisley

Degree Program

Department of Economics

Degree Type

Master of Arts

Abstract

A question asked by many baseball fans during the past two decades has been, “Do baseball players really earn multimillion dollars salaries by simply playing a game?” Previous studies have attempted to show that they go generate enough revenue for a given club to justify these exorbitant earnings. In fact, these studies show that, until recently, baseball players have been exploited by owners who have been reaping major profits at the expense of the players.

Most studies utilize fan attendance to generate revenue figures in their respective regression equations. The intent in this paper is to determine if baseball players salaries are dependent solely on their ability to draw fans to their respective balls parks. Once a fan drawing power estimate is established, analysis will be made as to whether salaries are based upon this factor. Estimating the average amount fans will spend while attending games will also allow the comparison of revenue estimates with salaries. And finally, a brief investigation will determine if free agent status has any bearing on salary in conjunction with fan drawing power.

Data from the 1991 baseball season, from all twenty six major league teams, for both hitters and pitchers, are included in this study. The analysis of this data was made through the two equation model perfected by Scully in his often referenced paper of 1974, where he estimated baseball players marginal revenue products, allowing comparisons to player salaries.

The results demonstrate that in 1991 player salaries were not based solely on their ability to draw fans to the ballpark. Establishing a fan revenue figure also shows that, on average baseball players do generate enough revenue to substantiate salaries in the $2.0-$2.5 million range. Finally, utilizing a free agent attribute illustrates that simply playing baseball over six years will substantially increase salaries, regardless of the player’s status. In fact, the non-free agent players earn two and one half times less than their free agent counterparts but have the same revenue generating abilities. The final conclusions are the choice of the reader; the author has only attempted to collect the facts and present them for your review.

Disciplines

Economics | Social and Behavioral Sciences | Sports Studies

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