Monopsony Exploitation in Professional Sport : Evidence from Major League Baseball Position Players, 2000-2011

Some professional athletes still face monoposony power in labor markets, underscoring the importance of estimating players' marginal revenue product (MRP) to assess its effects. We introduce two new empirical approaches, spline revenue functions and fixed-effects stochastic production functions, into the standard Scully (1974) approach to MRP estimation, and calculate Monoposony Exploitation Ratios (MERs) for position players in Major League Baseball over the 2001-2011 seasons. Estimates indicate that MERs are about 0.89 for rookie players, 0.75 for arbitration eligible players, and 0.21 for free agents. Recent collective bargaining agreements have reduced MERs for free agents, but had no effect on MERs for other players