Major League Baseball and Arbitration
Posted by Site Staff on Tuesday February 12, 2008
What changed the economic structure of Major League Baseball forever? There was a time when major league players were dominated completely by the “reserve clause” in their contracts. This clause prevented major league teams from competing for one another’s players and restricted players labor market worth to the team holding his contract from the previous season. There are fancy economic theories which show and expose that in real life these baseball players were being hurt financially by this seeming slavery type process. Arbitration techniques were utilized to break this monopolistic hold, enabling players to realize a free market and free agency through “last offer” arbitration and grievance arbitration. Arbitration and Salary Gaps in Major League Baseball, Elizabeth Gustafson and Lawrence Hadley, Quarterly Journal of Business and Economics, Vol.#34,1995.
Last Offer Arbitration is a procedure where during arbitration the parties each give to the arbitrator their last offer of settlement. The arbitrator then choses one offer or another and the parties agree to be bound by that decision. It is in the best interest of the parties to be as realistic as is possible. Negotiations will be less likely frozen prior to arbitration as mutuality is assisted from the fact that the arbitrator decides which offer to accept as the decision.
Could you explain why the players before the arbitration process were considered “slaves”.
Posted by: Brian on Monday March 3, 2008