Two assumptions in this analysis of baseball salary arbitration are that (1) players and clubs, to serve their interests in pre-arbitration negotiation, submit final offers to maximize and minimize, respectively, the expected value of the arbitrator's decision, and (2) arbitrators whose...

Arbitration in Major League Baseball can be explained by baseball clubs "lack of information regarding their players" risk attitudes. Different player risk attitudes yield different contract zones of potential settlements. Profit-maximizing baseball clubs must sacrifice some potential...