SchmidtBerriJSE2001

SchmidtBerriJSE2001 - Schmidt, Berri / COMPETITIVE...

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JOURNAL OF SPORTS ECONOMICS / May 20 1 Schmidt, Ber i / COMPETITIVE BALANCE AND AT ENDANCE Competitive Balance and Attendance The Case of Major League Baseball MARTIN B. SCHMIDT Portland State University DAVID J. BERRI Coe College Both the popular press and industry insiders have claimed that the growing gap between the “rich” and “poor” teams in major league baseball has led to a greater disparity on the field of play and that the eventual outcome of this gap will be lower attendance. The pur- pose of this inquiry is twofold. First, an investigation into the level of competitive balance reveals that relative to major league baseball’s historical record and contrary to the con- tentions of the media, the 1990s was the most competitive decade on the field of play. Second, the previously unexplored link between aggregate attendance and league com- petitive balance is examined. This investigation suggests that a relationship between these factors does indeed exist, whether one explores the relationship strictly across time or with the use of a panel data set. The essential economic fact concerning professional team sports is that gate receipts depend cru- cially on the uncertainty of outcome of the games played within the league. As the probability of either team winning approaches 1, gate receipts fall substantially. Consequently, every team has an economic motive for not becoming “too” superior in playing talent compared with other teams in the league. On the other hand, gate receipts of the home team are an increasing function of the probability of the home team winning for some range beyond a probability of .5, so that every team has an economic motive to be somewhat superior to the rest of the league. —El-Hodiri & Quirk (1971, p. 1306) The seminal work of El-Hodiri and Quirk (1971) laid forth the essential dilemma facing a professional sports league. Each team strives to put together a level of talent that increases the probability that it will defeat its opponents. How- ever, if the team achieves too much success with respect to the objective of win maximization, the objective of profit maximization may be compromised. In the 145 AUTHORS’ NOTE: We would like to thank the editor and an anonymous referee. We would also like to thank Rodney Fort for providing additional data. The usual disclaimer still applies. JOURNAL OF SPORTS ECONOMICS, Vol. 2 No. 2, May 2001 145–167 © 2001 Sage Publications, Inc.
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words of Walter Neale (1964), whose seminal work preceded El-Hodiri and Quirk (1971) by 7 years, the prayer of a premier team such as the New York Yankees must be, “Oh Lord, make us good, but not that good” (Neale, 1964, p 2). The success of the Yankees and the Atlanta Braves in the 1990s has led some to question whether these two franchises have become “too good.” The Yankees’ his- torical domination of major league baseball has been well documented. Their sweep of the Braves in the 1999 World Series gave the Yankees their 25th champi- onship in the 20th century. Although the Yankees had not won a single champion-
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SchmidtBerriJSE2001 - Schmidt, Berri / COMPETITIVE...

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