Rodney Fort

“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.

Owner objectives and competitive balance.

A growing literature on leagues composed of owners maximizing winning percentage shows that particular league rules have different impacts compared with leagues composed of profit-maximizing owners. But the underlying question of how to distinguish between the two types of leagues has received no treatment. In this article, we show that the two types of leagues can be distinguished in the talent market. A league of winning-percentage-maximizing owners will have higher talent costs and greater demand for talent. But, and perhaps more important, the level of competitive balance between the two types of leagues is indeterminate. In addition, a new policy instrument is suggested, namely, nudging owners toward one or the other objective, depending upon the particular locations of the demand for talent if owners pursue profits or winning percentage.

Pitfalls to Measuring Competitive Balance With Gini Coefficients

League-winning percentage Gini coefficients have seen recent use as measurements of within-season competitive balance in Major League Baseball. The authors demonstrate that the zero-sum nature of league play renders past estimates inappropriate. Adjusted for league play, Gini coefficients reveal a much larger competitive balance problem than shown in previous estimates. However, additional complexities involving unbalanced schedules, interdivisional play, and now interleague play must be overcome before winning percentage Gini coefficients can give precise estimates of competitive balance. The authors suggest using the traditional measures of winning percentage standard deviations and their idealized values to analyze within-season competitive balance over time until these issues are overcome.

Location and attendance in major league baseball

This study uses a travel-cost model to analyse the attendance impacts on Major League Baseball (MLB) of the closest substitute MLB team. It is found that the closer two teams are, the lower attendance is at each team relative to two teams that are farther apart. In addition, when a new team moves into the area of an existing team, there is an additional initial reduction in attendance for the incumbent team. This has implications for actions aimed at changing the number of teams in MLB either by contraction or by possible antitrust approaches that would increase the number of teams, especially in megalopolis markets. Further, and consistent with past demand studies, pricing is in the inelastic portion of gate demand and fan loyalty is a significant contributor to the estimation of gate attendance.

European and North American Sports Differences(

Past comparative work argues that the differences between European and North American sports dramatically outweigh any similarities. This paper explores the arguments that fans, sports organizations, and team objectives are different in the two regions and offers a set of questions that must be answered if, indeed, the opposite is not true. In addition, insights gained from the overriding similarities are offered concerning competitive balance, life after the Bosman decision, broadcasting, and league structure in Europe. European sports are far from any tragic end, but directors of sports organizations have seen the handwriting on the wall, economically speaking. They are about to live in lively times.

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.

Stationarity and Major League Baseball Attendance Analysis

If a sports time series, such as attendance, is nonstationary, then the use of level data (e.g., demand estimation using panel data) leads to biased estimates, and the direction of the bias is unknown. In past works, authors have failed to reject nonstationary data, taken first differences, and proceeded with further analysis. That is a legitimate approach, although limiting (e.g., no elasticity estimates can be had from first differences). However, if the data are stationary, then all is well with the usual applications to level data (e.g., taking logs gives direct elasticity estimates). This article rejects that the Major League Baseball attendance time series is nonstationary with break points and suggests the break points deserve additional analysis to facilitate attendance demand investigations.

Fan substitution and the 2004-05 NHL lockout.

This study estimates fan substitution in sports using the 2004-05 National Hockey League (NHL) season-long lockout as a natural experiment. The authors find that NHL fans substitute minor league and junior league hockey for the NHL. Because this is not due to a change in the price of a substitute good, the findings point to pure substitution effects without income effects. The findings have implications for future work on fan demand, especially for those studying habit and loyalty, or sports policy.

The Golden Anniversary of “The Baseball Players’ Labor Market”:

Rottenberg’s “The Baseball Players’ Labor Market” holds the original ideas behind many threads of the sports economics literature. Most well known, the article contains both the invariance proposition (IP) and the uncertainty-of-outcome hypothesis. But there is also a rather complete specification of attendance demand and much more. Given this, it is strange that the IP has been “morphed” into the Coase theorem in portions of the sports economics literature. Rottenberg deserves better than footnote status, and an insightful empirical test is lost in this transformation. This article documents this and tests the IP directly on an occurrence missed so far in the literature (but also documented by Rottenberg) to point out the continued importance of the IP, even up to the golden anniversary of its original publication.

Thinking (Some more) about Competitive Balance

Analyzing competitive balance seems to produce insights in two fundamental areas. On one hand, we can evaluate the efficacy of league and government competition policy choices. On the other hand, following the large uncertainty of outcome literature, we can evaluate the impact of competitive balance on fan demand both during the season and between seasons in the playoffs. This is more interesting than it might seem at first, because it helps explain a current point of confusion concerning the actual measured behavior of competitive balance itself and the level of concern over competitive balance. Within-season competitive balance in baseball has improved generally by decade. The 1990s are a bit of a roller-coaster ride, but recent seasons prove that this decade was no excep tion to this general trend. In addition, although the names of the larger revenue mar ket teams change occasionally, competitive imbalance remains much, as always, in the playoffs.But fans and other observers seem increasingly dissatisfied with this state of affairs(although I am unaware of any comprehensive historical analysis that actually finds this is true). There is no paradox here once we recognize something important. Quality of competition is simply a preference issue, and preferences can change over time. Fans can feel however they want to about competitive balance! And economists may find the impact of quality of competition affects demand more now than ever despite the observed fact that competitive balance as a measurable attribute of league outcomes has not worsened.