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|Title: ||Major League Baseball Player Contracts: An Investigation of the
Empirical Properties of Real Options|
|Authors: ||Clayton, Matthew|
|Keywords: ||real options|
|Issue Date: ||Nov-1999 |
|Series/Report no.: ||FIN-99-051|
|Abstract: ||We study contracts negotiated between professional baseball players and
teams to investigate the use of real options in a commercial setting.
Baseball contracts feature options in diverse forms, and we find that
these options have significant effects on player compensation. As
predicted by theory, players receive higher guaranteed compensation when
they allow teams to take options on their future services, and lower
salaries when they bargain for options to extend their own contracts.
The apparent value of options decreases as a function of the
"spread" between option exercise price and annual salary and
increases as a function of the time until exercise.|
|Appears in Collections:||Finance Working Papers|
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