Date of Award

Spring 6-4-2023

Document Type

Thesis (Undergraduate)

Department

Quantitative Social Science

First Advisor

Michael Herron

Abstract

I assess the decisions of arbitrators in Major League Baseball (MLB) salary arbitration hearings under the arbitrator exchangeability hypothesis. Salary arbitration occurs when a player, typically one with more than three, but fewer than six, years of major league service, cannot reach an agreement with his team on a contract for a given year. When this happens, the player and team go to an arbitration hearing. In a hearing, each side presents oral arguments in front of a panel of three independent arbitrators, proclaiming why the arbitrators should rule in their favor. The arbitrators then either decide to award the player his request or the team’s offer as his salary for the upcoming season. Arbitrators are not permitted to issue compromises. Historically, teams have won roughly 60 percent of hearings, suggesting that arbitrators might have a pro-team bias. However, my research demonstrates that teams should have won approximately 70 percent of hearings, indicating that arbitrators might actually favor the players. Because there is a statistically-significant difference between the 60 percent observed team win rate and the 70 percent expected team win rate, my results suggest the baseball arbitrators behave in a manner that is inconsistent with the arbitrator exchangeability hypothesis, with a resulting pro-player skew.

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