Player Disability Days Spent on Disabled List per Season Precontract Postcontract Percentage Change All Players 4.73 12.55 1654 Renewed players 4.76 9.68 1034 Free agents 4.67 17.23 268.9 Chapter 17 Slide 16
Chapter 17 Slide 16 Player Disability All Players 4.73 12.55 165.4 Renewed players 4.76 9.68 103.4 Free agents 4.67 17.23 268.9 Days Spent on Disabled List per Season Precontract Postcontract Percentage Change
Lemons in Major League Baseball a Findings Days on the disabled list increase for both free agents and renewed players o Free agents have a significantly higher disability rate than renewed players o This indicates a lemons market Chapter 17 Slide 17
Chapter 17 Slide 17 ◼ Findings ⚫ Days on the disabled list increase for both free agents and renewed players. ⚫ Free agents have a significantly higher disability rate than renewed players. ⚫ This indicates a lemons market. Lemons in Major League Baseball
Lemons in Major League Baseball ■ Question If you are a team owner, what steps would you take to reduce the asymmetric information for free agents? Chapter 17 Slide 18
Chapter 17 Slide 18 ◼ Question ⚫ If you are a team owner, what steps would you take to reduce the asymmetric information for free agents? Lemons in Major League Baseball
Market Signaling a The process of sellers using signals to convey information to buyers about the product's quality helps buyers and sellers deal with asymmetric information Chapter 17 Slide 19
Chapter 17 Slide 19 Market Signaling ◼ The process of sellers using signals to convey information to buyers about the product’s quality helps buyers and sellers deal with asymmetric information
Market Signaling a Strong Signal To be effective, a signal must be easier for high quality sellers to give than low quality sellers Example Highly productive workers signal with educational attainment level Chapter 17 Slide 20
Chapter 17 Slide 20 Market Signaling ◼ Strong Signal ⚫ To be effective, a signal must be easier for high quality sellers to give than low quality sellers. ⚫ Example ◆Highly productive workers signal with educational attainment level