Hold-up in the NFL: Team specific investment in the National Football League

In a Nash bargaining scenario players will not be fully compensated for investments in their own productivity which are not transferable between teams. This paper constructs a model of NFL players' compensation to examine the optimal investment level when there are both general and team specific investments. It is found that specific investment will lead to less than optimal investment levels. Furthermore, teams and players will be able to increase the optimal investment level by agreeing to an initial contract. The model predicts that players i n positions that require a large specific investment will find it optimal to agree to a long term contract in which a greater proportion of the salary is paid in the first period. The model also predicts that players in positions that require a large specific investmenl will switch teams less often. Using NFL data I find evidence to support these predictions.