Allen Sanderson and John Siegfried, “Thinking About Competitive Balance,” Journal of Sports Economics, 4:4 (November, 2003), 255-291.
In February, 2003, Allen Sanderson (University of Chicago) and John Siegfried (Vanderbilt University) organized a conference on Baseball Economics at Vanderbilt University. The papers and the comments from discussants were published in the November, 2003 issue of the Journal of Sports Economics. This paper by Sanderson and Siegfried was the lead-off paper at the conference. It provides an excellent non-technical discussion of the concept of competitive balance applied to Major League Baseball (MLB), of related issues that must be considered in any analysis of balance, and of the likely economic consequences of policies designed to alter competitive balance.
The first part of their paper examines various conceptual issues. Specifically, the authors discuss the problems of defining competitive balance and measuring it. They discuss the tension between balance and uncertain outcomes on the one hand versus the appeal of fielding an excellent team that dominates play for a number of years on the other hand. They also give numerous examples of other sports that exhibit greater imbalance than MLB while enjoying economic success. In short, it is not clear that there is a competitive balance problem in MLB!
The second part of the paper examines policies that may impact competitive balance. This discussion encompasses revenue-sharing plans, luxury taxes, payroll caps, and reverse order drafts among others. The paper makes any number of important points: some easily understood and some not so obvious. For example, revenue sharing should be linked to a team’s performance on the field if one expects the subsidized small-market owners to use the shared revenue to purchase more playing talent. In the end, the authors raise the same basic question: Why is MLB a target for criticism when so many other sports (professional and college) exhibit much greater levels of imbalance? “Does competitive imbalance in baseball deserve so much attention. Is there anything there beyond four Yankees’s titles in a 5-year period?”
Comments by three discussants (Rod Fort, Brad Humphreys, and Leo Kahane) follow the paper. One of the main points in these comments is that fans’ preferences about competitive balance influence their attendance behavior, and this relationship is not well understood by economists. Also, if there is competitive imbalance, it is the result of MLB’s monopoly power over the number of teams and their locations. Finally, policies to alter competitive balance should be consistent with incentives for and rewards to superior front-office managers/owners who put together superior teams.
Reviewed by: Lawrence Hadley
University of Dayton
Dayton, OH 45469-2251
Copyright © 2004 Larry Hadley. All rights