Testing for moral hazard in guaranteed contracts – Stiroh ( Economic Inquiry, 2007 ). Guaranteed contracts are paid in spite of performance, and indeed despite injury. Question: do players who get them shirk?. Arguments against:.
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Moral-hazard hypothesis predicts rising performance in contract year, declining performance in first year after signing.
Problem: perhaps rising performance in year before free-agent contract signed is a selection problem; only those who are improving get these contracts, so of course they would have great performances in prior year.
Solution: if this hypothesis is true, they should continue to improve in first year of new contract.
Results: performance consistently increase in contract year, and frequently (depending on precise econometric specification) fall in first year of new contract.
American League (AL) pitchers don’t hit themselves, and can therefore hit batters with fewer expected consequences. National League (NL) pitchers must hit.
Implication: AL pitchers should hit batters less.
Similar to Sam Peltzman’s findings that seat-belt laws and auto air bags promote riskier driving.
However, the penalty for a hit batter is that the batter is awarded first base. Pitchers are weak hitters, and are followed in the lineup by the best hitters, and so giving them a free pass is costly. This too would prompt the NL to have lower rates of hit pitchers.
Previous work notes that AL pitchers hit batters less than NL pitchers. But these are “macro” studies, not looking at individual “micro” events.
Test: Regress probability of any player getting hit on whether DH rule is in effect, batter OPS, pitcher-quality measures (opposing OPS, pitcher’s walk rate – to standardize for unintentional HBP), opponent being HBP in previous half-inning, whether pitcher appears in inning with HBP in previous half-inning, whether previous hitter hit home run, game situation.
Findings: large score differential, team currently losing, at-bat following home run, HBP in previous half-inning, and pitcher hitting after previous HBP. Latter increases pitcher’s probability of being hit by four times.
Lack of pitchers hitting explains 80% of difference between HBP rates in AL, NL.
Data: ACC tournament games; three officials, 1979-1983 and two before.
Also, two rule changes: prior to 1973, first six fouls in a half led to one free throw.
Testing effect of third official: regress fouls called on game score, team height difference, difference in team and coach experience, importance of game (measured by attendance), referee experience, number of officials, costs and benefits of fouling (fouled team’s field-goal and free throw shooting percentage), pace of game (combined score).
Primary result: number of officials is negatively related to fouls called – about 17 per game. All other variables except attendance significant as expected.
Indirect test: number of upsets in tournament. Assumption: the better the officiating, the more likely the higher-seeded team will win. A third official might preserve the mean of game outcomes but lower the variance.
Must also standardize for rise in size of NCAA tournament.
Third official reduces chance of upset by ten percent, other things equal. A third official reduces the variance of game outcomes.
A third official also increases scoring, which authors interpret as less output-destroying conflict.