Joel G. Maxcy

“Competitive Balance in Sports Leagues: An Introduction”:

The authors summarize the literature on competitive balance to point out that there is no need for Zimbalists editorial position that a single measurement of competitive balance is the correct measure, whereas others are not. Different measurements are of different use, and all lines of research into competitive balance have, to date, proven quite instructive. To ignore this is to forgo important insights into the behavior of competitive balance.

The Effectiveness of Incentive Mechanisms in Major League Baseball

Past work on principal-agent problems in sports does not effectively compare among players. The comparison must be made between players nearing contract negotiations and other players to detect ex ante strategic behavior (turning up performance just prior to contract negotiations) and ex post shirking (slacking off after signing the contract). The authors’ productivity measures include statistics reflecting both the player’s desire (or availability) to play as well as his performance once he enters a game. The data reject strategic performance. This suggests that mechanisms aimed at curbing strategic performance by players appear to be working well. However, pitchers with nagging injuries may be more likely to be placed on the disabled list while under long-term contracts. This may imply strategic behavior or, conversely, that clubs are choosing to protect an investment. A performance measure used to test for shirking affects some results but not the ultimate conclusions.

The impact of salary dispersion and performance bonuses in NFL organizations

Purpose – This paper aims to evaluate the effects of both salary dispersion and incentive pay on team performance using data complied from the National Football League over the years 2000‐2007.Design/methodology/approach – The authors consider the effect of pay structure on both in terms of on‐field and financial performance. Salary disparity and its subsequent consequences has been a topic of economic research on corporate pay structure and also professional team sport organizations. Analysis of pay structures incorporating the effects of incentive pay on performance is also recurrent in the literature. The paper uses regression analysis and incorporates both fixed and random effects models.Findings – A relationship between improved on‐field performance and increased payroll, lower levels of salary dispersion, and increased incentive payments is found. However, when employing team revenue production as the measure of performance, a positive relationship with salary dispersion is found.Research limitation...

Adjusting Winning-Percentage Standard Deviations and a Measure of Competitive Balance for Home Advantage

One measure of sports league competitive balance uses a ratio: the standard deviation of team winning percentages is divided by the so-called ideal standard deviation, which assumes a game between evenly-skilled teams is equally likely to be won by either team. In fact, a team is more likely to win when playing at home than when playing on the road. The extent of this advantage differs across sports leagues. Home advantage reduces the variability of season-long team records. Ignoring home advantage biases upward the traditionally measured ideal standard deviation and bias downward the ratio of standard deviations. The authors derive a balanced league standard deviation formula that accounts for home advantage, use it to recompute the ratio of standard deviations for major sports leagues, and consider how the adjustment affects comparisons of competitive balance across those leagues.

The Demise of African American Baseball Leagues A Rival League Explanation

Organized African American baseball (AAB), the longest lived rival to Major League Baseball (MLB) in history, thrived from the 1920s through the early 1940s. Although integration in 1947 focused attention on MLB and the American experience, the impact on AAB receives only passing, somewhat wistful notice. From the economic perspective, the unabashed talent raiding by MLB killed AAB a couple of years after integration began. The authors show that AAB did pose an economic threat to MLB. Given this, the theory and history of MLB behavior toward rival leagues would have predicted actions by MLB to end the threat posed by AAB and a better economic outcome for at least some of the AAB owners and players than actually occurred. Although the former occurred, the latter never materialized for AAB. Competitive baseball was lost to countless thousands of fans throughout the South and Midwest, profitable businesses were lost to African American and White AAB team owners, and hundreds of African American players were denied a “big league” livelihood as the result of integration. The general perception is that integration was a positive thing but costly to many.

Evaluating Destination Advertising

Park, Nicolau, and Fesenmaier proposed the Destination Advertising Response (DAR) model as a means to more effectively evaluate destination advertising campaigns by incorporating the key decisions or components (i.e., facets) that comprise a trip. While this model appears to be an attractive alternative to traditional destination advertising evaluation, little research has been conducted to examine its validity. The goal of this study is to evaluate the potential usefulness of the DAR framework based upon current understanding of the travel decision-making process and industry practice. Additionally, the framework is evaluated based on a series of empirical analyses that consider the impact of destination advertising on the destination decision as well as on several trip-related decisions. The implications of this model for destination advertising are substantial in that it provides a much richer foundation for the development of destination marketing strategies.

Efficiency and Managerial Performance in FBS College Football: To the Employment and Succession Decisions, Which Matters the Most, Coaching or Recruiting?

This article develops a model of managerial efficiency for National Collegiate Athletic Association’s top division college football coaches. The derived efficiency measures are then linked to the hiring and firing process. The work concludes with an evaluation of the effect of head coach succession on team performance. This study evaluates coaching efficiency in terms of both use of talent and recruiting talent. The constructed efficiency rankings are used to evaluate hiring and firing decisions and determine the degree that each type of efficiency plays in these decisions. Last, the efficiency of the market is assessed by evaluating whether universities are making a good choice and are able on average to improve performance when replacing an underperforming coach. The empirical results indicate that both constructs of efficiency matter. Coaches who exhibit high level of both types of efficiencies regularly move up to the most lucrative jobs. Replacement of poor performing coach is most often a wise decision.

Economics of the NFL Player Entry Draft System

The National Football League instituted the reverse order draft for entering players (rookies) in 1936. The NFL system is the original version of a player entry draft, and subsequent draft systems developed by North American team sport leagues are based on this model. The draft determines the initial contract assignment for (most) entering players. The entry draft creates a monopsony situation whereby the player may bargain only with one potential employer. Negotiation leverage for entering players is greatly reduced, and theoretically the monopsony (single buyer) model restrains salaries. As with most restrictions limiting labor mobility, the NFL draft was initially promoted as a tool to remedy competitive imbalance, and has since been defended as necessary to maintain competitive balance. Although the effect of the draft on competitive balance is ambiguous at best, the elimination of a competitive labor market and bargaining power for entering players’ services accomplishes the league’s objective of eliminating bidding competition and quite clearly reduces salaries. Notwithstanding, the very best entering players, the top draft choices, may also possess significant bargaining power. Contract negotiations in these circumstances may reflect a bilateral monopoly outcome where negotiated salaries compare to a competitive market result.

On the Demand for Live Sport Contests: Insights From the Secondary Market for National Football League Tickets

This study examines the determinants of regular season National Football League (NFL) ticket prices on the secondary, or resale, market. Prices in the secondary market are dynamic and thus particularly useful for evaluating the demand for live NFL contests. A rich dataset is employed that contains information about all transactions conducted by a prominent ticketing site during a full NFL season and allows for a comprehensive investigation of the components of demand in this market. Included in the analysis is a first look at the demand for different seating locations within the stadium. The revealed determinants of demand for resale tickets were largely consistent with studies of the primary market; however, there are notable differences in spectators’ preferences for contest characteristics and uncertainty of outcome across the seating categories. The evidence also suggests that while hometown fans are the primary participants, visiting teams are likely active in the resale market.

Reversal of Fortune or Glaring Misallocation: Is a New Football Stadium Worth the Cost to a University?

American universities, belatedly following their professional sports counterparts, are constructing new stadiums. A portion of the funds typically provided to athletic departments are drawn from general university resources. Besides increased revenue flows, indirect benefits that contribute to university objectives are typically cited as part of the demand for a new college stadium. Examples of these spillover benefits are an enhanced campus community, a higher quality student body, and more alumni donations. We analyze a university’s stadium proposal and apply standard capital budgeting techniques to the proposed stadium’s estimated cash flows. It is revealed that the project is a sound financial investment only under the most optimistic circumstances. Yet, the investment can be worthwhile to the university if the net value of the spillover benefits exceeds the financial loss. We consider all likely spillovers, and conclude that it is more likely the desired spillover benefits can be more efficiently achieved with other investment choices.