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Tuesday, April 24 • 9:40am - 10:00am
Fixed Revenue Streams, Marginal Revenue Product, and Bargaining Power: An Econometric Analysis of NBA Players’ Salaries

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In this study, I attempt to replicate the work of sports economists David Berri, Michael Leeds, and Peter von Allmen, using their two-step model to examine the determinants of NBA players’ salaries in the presence of fixed revenue streams. Prior to Berri et al.’s study, an athlete’s salary was compared to an estimate of their marginal revenue product (MRP). However, as Berri et al. point out, professional sports leagues have large fixed revenue streams that can be unrelated to the performance of current players, complicating the comparison of a player’s MRP to their salary. The two-step model proposed by Berri et al. instead posits that players are compensated for their labor’s addition to variable revenue (i.e. their MRP) as well as paid a portion of fixed revenue (i.e. league-wide shared national television contracts) over which they must bargain for with the team that is offering the contract. Through quantile and fixed effects regression analysis, Berri et al.’s paper explores how different factors such as player characteristics, team characteristics, the size of fixed revenue streams, and a player’s agent impact a player’s bargaining power. In my paper, I replicate this process to discover whether Berri et al.’s findings hold when applied to a different dataset. With the increased concern within the academic community over p-hacking and the replicability of results, studies such as this one offer an important contribution to the literature.

Tuesday April 24, 2018 9:40am - 10:00am PDT
035 Karpen Hall

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