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- Title
Should Players Trust Their Agents? Portfolio Size and Agency Behavior in Major League Baseball.
- Authors
Krautmann, Anthony; von Allmen, Peter; Walters, Stephen J.K.
- Abstract
We examine bargaining for long-term contracts in baseball, which usually involves agents negotiating on behalf of players. We show that when an agent represents a large portfolio of clients, the agent's interests may diverge from those of the client. Such agents face less risk than their clients and therefore may calculate a minimum-acceptable contract offer that exceeds that of their clients. Using a sample of nearly 500 eligible players, we test for the presence of this principal--agent problem and find evidence that the size of an agent's client portfolio negatively affects the probability of successfully negotiating a long-term contract. The results have important implications for both players and team management as they shed light on the circumstances under which incentive compatibility may be compromised.
- Subjects
CONTRACT negotiations; PROFESSIONAL sports contracts; BASEBALL players; SPORTS agents; FREE agents (Sports)
- Publication
Journal of Sport Management, 2018, Vol 32, Issue 3, p199
- ISSN
0888-4773
- Publication type
Article
- DOI
10.1123/jsm.2017-0148