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Baseball Arbitration Bats 1,000 For the Year

2013 February 18
by Phil Miller

For the first time ever this year, no baseball player went to arbitration.  From ESPN.

Reliever Darren O’Day completed a $5.8 million, two-year contract with the Baltimore Orioleson Monday, becoming the 133rd and final player to settle without a hearing among the 133 who filed for arbitration Jan. 13.

This was the first year since arbitration began in 1974 that no player who filed went to a hearing.

Link via my former student David Dicks.

Baseball uses a form of final offer arbitration in which an arbitrator is restricted to selecting either the final offer submitted by the player or his team (although technically speaking, the offers aren’t final since negotiations can continue even after offers have been submitted).

The economists in the TSE audience may be interested to know that final offer arbitration was originally proposed by the economist Carl Stevens in this 1966 paper.  Up to that time, the main type of arbitration that was used, commonly called “conventional arbitration”, was one where arbitrators could render any decision in a case, and it was not at all uncommon for the judgment to be right between what each party wanted, basically splitting the difference.  Some observers felt that this supposed splitting-the-difference would chill bargaining.  Why go through the trouble of negotiating when the arbitrator will just split the difference?

Stevens wanted a type of arbitration that would lead to more negotiated settlements, believing that settlements arrived at in that manner are superior to those imposed by third parties.  In theory, final offer arbitration should lead to more negotiated settlements than conventional arbitration because FOA makes losing a case more costly to both sides.

This year baseball arbitration batted 1,000.

Here’s a 1990 Chicago Tribune article that has some quotes by Stevens on what he originally called “either-or arbitration”.

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