Abstract
In this paper, we consider whether underpaying players restricted by the reserve clause is a common practice in the three largest sports leagues in North America—the NFL, NBA, and MLB. Our results are consistent with the hypothesis that owners of profes- sional sports teams do exercise monopsony power whenever and wherever they can. Although differences exist across the three sports, our results indicate that in general: restricted players are underpaid; when the negotiating power of players rises, owners are less able to extract a surplus; and, the greatest surplus tends to be extracted from those who create the greatest amount of value.
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