Shirking in Major League Baseball Revisited

Abstract

A number of studies in sports economics looked at the shirking problem inherent in long-term contracts. Shirking is inferred if the player's actual performance falls below expected performance in the year following a newly signed long-term contract. In an attempt to shed light on these conflicting conclusions in the literature, we outline a novel approach for testing opportunistic behavior. We begin by running a standard test of shirking based upon a comparison of the player's expected to realized performance. We then introduce a new approach to analyzing shirking—one which is based on a comparison of a player's expected to realized Marginal Revenue Product. We find that tests for shirking are sensitive to the approach one uses in the analysis. In particular, when testing for opportunistic behavior using performance, we find no evidence of shirking. Yet when we conduct the test based on MRP, our tests suggest that players signing multi-year contracts create less value than they were expected to generate.