Under certain conditions, equity and expectancy theories yield opposite predictions. This study examines one such situation. Performance statistics from a sample of 172 Major League Baseball free agents were collected for the 2 years before and 1 year after each player's free agency filing. Equity theory suggests that performance decrements will occur when players perceive they are undercompensated in their free-agent year. In contrast, expectancy theory suggests that players' performance will be superior when they are up for new contracts. During the 1st year of a free-agent player's new contract, equity theory predicts that his performance will be superior, whereas expectancy theory predicts that it will be lower. Free agents' performance tended to decline after they signed contracts with new teams. This study suggests that if Major League Baseball teams pay free agents based on free-agent-year performance, they might not be satisfied with the results.
David Ahlstrom is with the Department of Management at The Chinese University of Hong Kong, Shatin, NT, Hong Kong. Steven Si is with the Department of Management at Concordia University, Montreal, Quebec, H3G 1M8, Canada. James Kennelly is with the Department of Business at Skidmore College, Saratoga Springs, NY 12866.