Baseball Economics: An Economic Analysis of the Present Situation in the Major League Baseball Players Market

Abstract

As the current collective bargaining agreement for Major League Baseball is drawing to a close, the Commissioner, Bud Selig, is seeking reforms to prevent another work stoppage like the strike in 1994.The economic structure of baseball suffers from a myriad of problems, the major one being a structural system that results in vast disparities in revenue among teams.This disparity translates into differences in winning percentage based primarily on the amount of total revenue a team takes in. Reforms are seeking to restore the popular goal of competitive balance. However, looking at the situation from an economic perspective, the popular opinion of competitive balance is at odds with the efficient solution according to economists.Restrictive practices are, however, necessary.I will argue that the existing mechanisms for redistribution, including the luxury tax, salary cap and revenue sharing, are incomplete.This research explores the optimal allocation of talent, and offers a solution in the form of voucher subsidies to reach this point.