The Sports Business as a Labor Market Laboratory

With superior data on compensation and productivity, as well as the occurrence of abrupt, dramatic market structure and player allocation rules changes, sports labor markets offer an excellent setting in which to test economic hypotheses. This paper reviews evidence from sports in four areas: employer monopsony, discrimination, the Coase Theorem, and incentive contracts, supervision and performance. There is considerable evidence of monopsony as well as for the existence of some forms of discrimination against minority athletes. Incentive contracts have strong effects on player performance and behavior, and there is mixed evidence on the predictions of the Coase Theorem.

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