Are Voluntary Agreements Better? Evidence from Baseball Arbitration

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ILR Review, ISSN: 0019-7939, Vol: 70, Issue: 4, Page: 865-893

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John W. Budd; Aaron Sojourner; Jaewoo Jung
SAGE Publications
Business, Management and Accounting
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article description
This study empirically examines the widespread belief that voluntarily negotiated agreements produce better long-run relationships than do third-party imposed resolutions, such as arbitrator decisions or court judgments. Major League Baseball provides a compelling setting for these analyses because individual performance is well measured, there is the possibility of relationship breakdown, and both voluntary and arbitrator-imposed resolutions routinely occur. Two key outcomes are analyzed: post-resolution player performance and the durability of the club-player relationship. Multivariate analyses of 1,424 salary renegotiations fail to find significant differences in subsequent player performance, but voluntary resolutions are associated with more durable post-resolution club-player relationships.