The goal of any professional athlete is to receive a multi-year contract that guarantees them a salary for multiple years. However, a concern that fans, coaches and owners all share is that when a player receives a multi-year contract they may have a strong incentive to shirk. Shirking is when a player purposely does not perform to the best of his ability and may occur when a player has a guaranteed salary. The goal of this paper is to determine if a Major League Baseball player with a multi-year contract will show any pattern of shirking throughout the contract. Each of the fifty players has a four year contract and the theories of moral hazard and asymmetric information suggest that a player may shirk during the contract until the last year. Descriptive statistics and OLS regression results provide evidence that Major League Baseball players with four year contracts do not have a pattern of shirking. Job security, above market wages and monitoring may be the important concepts explaining why there is no evidence for shirking.
Stankiewicz, '09, Katie, "Length of Contracts and the Effect on the Performance of MLB Players" (2009). Honors Projects. 103.