The Impact of Free Agency on Players’ Compensation

Abstract

This study examines whether players benefit from free agency or not. In professional sports, free agency has been a hot topic in recent years. Based on a bargaining model with arbitrary bargaining power, we found that players who have a relative smaller bargaining power to their owners still get lower payoffs after the implement of free agency, and vice versa. Moreover, the expected payoffs of players and sports teams are both not influenced by free agency.