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BerriSchmidtBrookJSE2004 - 10.1177/ ON OFA GATE REVENUES...

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10.1177/1527002503254051 ARTICLE JOURNAL OF SPORTS ECONOMICS / February 2004 Berri et al. / STAR POWER IMPACT ON NBA GATE REVENUES Stars at the Gate The Impact of Star Power on NBA Gate Revenues DAVID J. BERRI California State University–Bakersfield MARTIN B. SCHMIDT Portland State University STACEY L. BROOK University of Sioux Falls Investigations into the level of competitive balance within the four major North American professional team sports leagues suggest that the National Basketball Association (NBA) exhibits the lowest level of competitive balance. Given the role competitive balance plays in maintaining consumer demand, the authors examine the role the star attractions of the NBA play in promoting fan interest. The evidence presented suggests the choice of func- tional form alters the significance of the relationships uncovered. Specifically, the signifi- cance of star power is only uncovered in a multiplicative model rather than in the com- monly employed linear form. Additional empirical results are reported in the text. Keywords: consumer demand; competitive balance; superstar effect; basketball C ompetitive balance in professional team sports has been the subject of numer- ous theoretical and empirical publications. The theoretical literature argues com- petitive imbalance, or the on-field domination of one or a small number of organi- zations, reduces the level of uncertainty of outcome and consequently reduces the level of consumer demand. 1 The empirical literature, whether examining game day attendance 2 or aggregate season attendance, 3 has also generally confirmed a rela- tionship between uncertainty of outcome or competitive balance and demand for tickets to sporting events. Decision makers in the professional sports industry have not needed economists to understand this basic relationship. Virtually from the inception of organized 33 JOURNAL OF SPORTS ECONOMICS, Vol. 5 No. 1, February 2004 33–50 DOI: 10.1177/1527002503254051 © 2004 Sage Publications
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sports in North America, leagues have enacted various institutions to promote com- petitive balance. 4 Such institutions include the reserve clause, the rookie draft, pay- roll caps, salary caps, revenue sharing, and luxury taxes. Despite the similarity of effort, professional team sports leagues continue to have varying degrees of com- petitive balance. The variability of competitive balance across professional team sports was illus- trated by Quirk and Fort (1992). One of the findings of this seminal work, extended by Berri and Vicente-Mayoral (2001) and Berri (in press), was the relative lack of competitive balance in the National Basketball Association (NBA). The relative imbalance continued in spite of the NBA’s institution of a rookie draft, payroll caps, revenue sharing, free agency, and, at times, a reserve clause. By virtually any mea- sure, the NBA has been unable to achieve the level of competitive balance observed in the other North American professional sports leagues.
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