CRITIQUE

The Old Ball Game: A Critical Analysis

The Old Ball Game: A Critical Analysis

Introduction

The main purpose of this article is to analyze the wages of baseball players playing the early 19th century. Basically, there were 2 different categories of wages; the first one involved a fixed wage while the other involved a percentage of the gate receipts. An analysis of wage with player performance depicted that teams that paid a fixed wage generally performed better than teams that were cooperatives. This phenomenon was in contrast to the expectations and this article tried to provide reasons for this anomaly. The first reason this article depicts is the risk taking nature of the owners.

This reason states that players who could have been risk averse would have preferred the fixed wage contract, while team owners who could have been risk averse would have preferred the cooperative style of payment. Lack of evidence depicting better players as being risk averse proves this reason as inconclusive. The second reason discussed is team production.

The reason provided is that in a fixed wage system, a central performance monitor could have been hired and that monitor's salary would have depended on the performance. Hence that monitor chose the best possible team to maximize his profits. In contrast, in a cooperative team, the team's members evaluated each other and in case on low performance, the loss would have been shared among all members. Hence the risk of loss is higher in the first situation. The 3rd reason implies that the top players were attracted to a wage rate because they felt inferior players could benefit from their profits and even drive their earnings down. To conclude this article, the author uses data related to past experience and uses various statistical tools to come up with a rational conclusion for explaining such a phenomenon.

Literature

There were various literature found on a topic concerning player performance and salaries. An article called Pay for Play written by (Watnik, 1988), utilizes various statistics to understand the performance of a baseball player and the pay. He uses various variables ranging from Salary, Batting Averages, Runs, and Experience to Home Runs and Errors. He uses a linear regression model and tries to correlate the performance metrics with the player salary. Based on his model, he was able to understand how each metric affected player performance, and to what degree was performance affected by the metric.

The second article written called Pay and Performance written by (Scully, 1974) analyzed the three different factors: The Salary Function, the Marginal Revenue Products, and the Rates of Monopolistic Exploitation. He analyzed salary as a function of the labor market and tried to correlate the salary of the labor market with the salary of the baseball players. He was able to find the rate of monopolistic exploitation by correlating salary with marginal revenue product varying over different performance levels and the number of experience.

The third article called “Fixed or Variable Pay?” written by (Lazear, 1996) uses various performance metrics to highlight employee ...