Baseball salary arbitration simulation: Teaching through active learning

1.  Objective:  Arbitration is a technique for the resolution of disputes. The parties to a dispute refer the case to arbitration by one or more persons. The arbitrator or arbitrator panel reviews the evidence in the case and imposes a decision that is binding on both sides.  The purpose of using a baseball salary arbitration simulation is to engage students so that they come to understand the principle and mechanics of the arbitration process while using economic concepts and tools as the foundation for their arbitration arguments.
2. Method: Student teams are asked to develop arguments for the market value of multiple baseball players.  Their estimates must use only information permissible under Article VI, Section E, Part 10 of Major League Baseball’s (MLB) collective bargaining agreement.  For different players, student teams are asked to take the role of player agent, team agent, or arbitrator panel. Then, arbitration hearings are held with student teams taking their respective roles for given players.  Outcomes are recorded.  When all hearings are complete, the arbitration processes, preparation, and outcomes are discussed.
3. Outcomes: The use of a baseball salary arbitration simulation provides the opportunity for students to be immersed in the operations of arbitration.  This engagement enables the students to practice and learn a number of key economic concepts and relationships.  First, they come to understand the fundamental principles and mechanics of an arbitration hearing.  Second, they are able to identify differences in incentives and practices used in conventional versus final offer arbitration.  Third, they develop a conceptual understanding of marginal revenue product (MRP). Fourth, they implement econometric techniques to estimate MRP for multiple arbitration participants. Five, enhance oral presentation skills as they argue multiple cases from the perspective of player agent, owner agent, and arbitrator. They identify the difference between arbitration outcomes and free market outcomes within the conditions of the baseball industry.