Racial Discrimination and Statistical Discrimination: MLB Rookie Card Values and Performance Uncertainty

Abstract

Objective. While previous studies document racial discrimination in Major League Baseball, few have considered statistical discrimination, and how racial bias may spill over into related markets. Investigating rookie card (RC) values at their initial release, we exploit the role of information uncertainty to separately identify the influence of racial discrimination and statistical discrimination. Methods. Using ordinary least squares (OLS) and Tobit models, we examine 6,026 cards released from 1986 to 1993. After documenting race-based differentials in MLB achievement, we explore the determinants of prices in certain and uncertain environments. Results. RCs of black players carry a 14-20 percent premium at their initial release. Race does not influence card values once careers are finished. Finally, given comparable career performance, prices for black players decline significantly more over time. Collectively, this suggests statistical discrimination influences consumers in this market. Conclusion. Racial discrimination in an upstream market can lead to spillover effects on related downstream markets.