Gate Shares and Agency Problems

There was a recent exchange on a sports economics listserv on player share of gate revenues from the playoffs in baseball. As usual, the shares are defined by the collective bargaining agreement. From

Q: How is the players' playoff pool created and how is it distributed? 
A: The Players’ pool is created from 60% of the total gate receipts from the first four World Series Games; 60% of the total gate receipts from the first four games of each League Championship Series; and 60% of the total gate receipts from the first three games of each Division Series. The Pool is distributed as follows: World Series Winning Team: 36%; World Series Loser: 24%; League Championship Series Losers (two teams): 12% each; Division Series Losers (four teams): 3% each; Non-wild Card Second Place Teams (four teams): 1% each. The division of a team’s Players’ pool shall be made by a vote of the Players, in a meeting chaired by the Player Representative.

Dan Marburger (permission granted) notes in an email to the listserv:

Note how the players only receive a share of the minimum number of games played in each
series. This is a response to a potential agency problem: if players
received a share of every game, they'd have a financial incentive to
extend each series to its maximum.

Well put!

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Author: Phil Miller

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