A small puzzle for Chip Sauer, John Palmer, and other sports economists

Gregg Easterbrook argues that first-round NFL draft choices who hold out cost themselves lots of money. While more data would be welcome, I think Easterbrook poses an interesting question.

One part of the explanation might be that many highly-touted prospects, given injuries and ordinary "couldn't cut it," don't get a lucrative second contract. Another might be that establishing a reputation for being a tough bargainer is also worth a lot of money.

But sports economists should feel free to chime in . . . .

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Empirical Test of a Separating Equilibrium in National Football League Contract Negotiations

MICHAEL CONLIN
Syracuse University - Department of Economics

Rand Journal of Economics, Vol. 30, No. 2


Abstract:
I empirically test for a separating equilibrium in the bargaining contract of National Football League (NFL) contract negotiations. The separating equilibrium predicts that a player who delays contractual agreement signs a more lucrative contract and has positive private information on his ability level at the time of contract negotiations. These predictions are tested using data on 1,873 players selected in the 1986 through 1991 NFL drafts. The empirical results support the implications of the separating equilibrium.