How Much Did Baseball’s Antitrust Exemption Cost Bob Gibson?

Abstract

Major League Baseball was granted an exemption to antitrust laws in 1922 by the Supreme Court. This exemption led to the creation of a monopsonistic labor market that prevented baseball players from fielding offers from other organizations once that player signed with any Major League Baseball team. Economic theory predicts that such a market would reduce a worker’s wage below a worker’s marginal revenue product. The question this study seeks to address is how much wage depression existed before the introduction of free agency in baseball in 1976. Specifically, we will examine the Hall-of-Fame career of Bob Gibson, a career that ended in 1975. Our examination will not only explore the standard approach economists have used to answer this question for more than forty years but also a simpler approach that gives a more realistic answer to the question.