Rethinking restrictions on player mobility in Major League Baseball

Abstract

This article considers the possibility that transactions costs and asymmetric income effects have altered the distribution of talent in the aftermath of institutional changes in Major League Baseball. This contradicts the invariance principle of Coase's theorem. Empirical evidence tracking player movement and competitive balance over the past 50 years conclusively supports these stands. Free agency, when permitted to proceed with limited interference, has increased the rate that productive players transfer and has also improved some measures of competitive balance. Competitive balance is also shown to have improved with the implementation of the draft. Policy prescriptions calling for increased restrictions on player mobility are ill advised.