scholarly journals Revenue sharing and within-team payroll inequality in Major League Baseball

2014 ◽  
Vol 22 (1) ◽  
pp. 80-85 ◽  
Author(s):  
Nicholas A. Jolly
Keyword(s):  
Major League Baseball ◽  
Revenue Sharing ◽  
Major League

Is offense worth more than defense and pitching? Marginal revenue product and revenue sharing in major league baseball

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Justin Andrew Ehrlich ◽  
Joel M. Potter
Keyword(s):  
Major League Baseball ◽  
Revenue Sharing ◽  
Ordinary Least Squares ◽  
Decision Makers ◽  
Marginal Revenue ◽  
Content Type ◽  
Marginal Revenue Product ◽  
Major League ◽  
Team Decision ◽  
Revenue Product

PurposeSports economists have consistently found that winning positively impacts team revenue fans prefer to allocate their entertainment dollars to winning teams. Previous research has also found that fans do not have a preference for how their team wins. However, this research ignores the significant variability in revenue that can exist between teams with similar attendance figures. The authors contribute to the literature by testing whether profit maximizing teams should pay different amounts for different types of production by estimating the marginal revenue product of a win due to offense, defense and pitching.Design/methodology/approachUsing data from the 2010–2017 Major League Baseball seasons and an Ordinary Least Squares-Fixed Effects approach, the authors test whether a unit of offensive, defensive and pitching production generates differing amounts of team revenue both before and after revenue sharing. The authors then test if team Wins Above Replacement is a good approximation of actual wins while accounting for the previously observed nonlinear relationship between wins and revenue.FindingsThe authors found that marginal revenue product estimates in the postrevenue sharing model for mowar, pwar and dwar are nearly identical to each other. Further, after predicting prerevenue sharing, the authors find that fans have no preference for mowar, pwar or dwar play styles.Originality/valueThe findings illustrate that team decision-makers appear to be acting irrationally by paying more for offense than they do for defense. Thus, the findings suggest that team decision-makers should value defensive wins and pitching wins at the same rate as offensive wins on the free agent market.

scholarly journals Revenue Sharing in Major League Baseball: The Moments That Meant so Much

2018 ◽  
Vol 6 (3) ◽  
pp. 71 ◽  
Author(s):  
Duane Rockerbie ◽  
Stephen Easton
Keyword(s):  
Major League Baseball ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Higher Order ◽  
Risk Averse ◽  
Positive Effects ◽  
Small Market ◽  
Major League ◽  
Sports Leagues ◽  
Professional Sports Leagues

Revenue sharing is a common league policy in professional sports leagues. Several motivations for revenue sharing have been explored in the literature, including supporting small market teams, affecting league parity, suppressing player salaries, and improving team profitability. We investigate a different motivation. Risk-averse team owners, through their commissioner, are able to increase their utility by using revenue sharing to affect higher order moments of the revenue distribution. In particular, it may reduce the variance and kurtosis, as well as affecting the skewness of the league distribution of team local revenues. We first determine the extent to which revenue sharing affects these moments in theory, then we quantify the effects on utility for Major League Baseball over the period 2002–2013. Our results suggest that revenue sharing produced significant utility gains at little cost, which enhanced the positive effects noted by other studies.

A Proposal for Incentive-Compatible Revenue Sharing in Major League Baseball

2012 ◽  
Vol 26 (6) ◽  
pp. 479-489 ◽  
Author(s):  
Michael G. Wenz
Keyword(s):  
Major League Baseball ◽  
Current System ◽  
Profit Maximization ◽  
Field Performance ◽  
Revenue Sharing ◽  
Optimal Level ◽  
Competitive Balance ◽  
Payroll Tax ◽  
Marginal Value ◽  
Major League

This paper proposes a payroll tax and revenue sharing model for Major League Baseball that better aligns the incentives of individual team owners with league-wide goals of competitive balance and cartel profit maximization. The author demonstrates why the current system is poorly suited for improving competitive balance, then argue for a system of transfer payments based on a more aggressive payroll tax combined with a subsidy distributed based on on-field performance rather than market size or financial performance. High-payroll teams would contribute disproportionately to the revenue-sharing pool, while successful teams would receive disproportionately large subsidies. By increasing the marginal value of a win through the performance-based subsidies, small-market teams will see increased incentives to invest in playing talent. The author presents some limited financial data and suggest how to calibrate the model to yield the optimal level of competitive balance and optimal revenue split between players and owners.

Individual Team Incentives and Managing Competitive Balance in Sports Leagues: An Empirical Analysis of Major League Baseball

2008 ◽  
Vol 45 (5) ◽  
pp. 535-549 ◽  
Author(s):  
Michael Lewis
Keyword(s):  
Programming Model ◽  
Major League Baseball ◽  
Revenue Sharing ◽  
Local Market ◽  
Competitive Balance ◽  
Structural Dynamic ◽  
Local Revenue ◽  
Major League ◽  
Sports Leagues ◽  
The Impact

Major League Baseball and other professional sports leagues have long been concerned with competitive imbalances caused by differences in local revenues. The fear is that in the absence of salary caps or other regulatory mechanisms, smaller-market teams will be unable to remain competitive. This research uses a structural dynamic programming model to analyze ownership's payroll investment decisions. This model estimates the relationship between optimal payrolls and local-market populations and the influence of long-term customer equity dynamics on payroll investments. In addition, the author analyzes the impact of a recent policy intervention that implemented revenue transfers from high-local-revenue markets to low-local-revenue markets. The statistical results indicate that market population has a significant impact on the value of a team's payroll investments. For example, optimal payrolls double as the population increases from 2.5 million to 7.5 million. Furthermore, rather than improving competitive balance, the adoption of revenue sharing has decreased the incentives for small-market teams to remain competitive. The author uses the estimation results to evaluate alternative approaches to managing competitive balance. Specifically, the results suggest that basing revenue-sharing payments on local-market population and (higher) attendance rates reduces payroll dispersion.

scholarly journals Revenue Sharing and Player Salaries in Major League Baseball

2015 ◽  
Vol 18 (8) ◽  
pp. 831-849 ◽  
Author(s):  
James Richard Hill ◽  
Nicholas A. Jolly
Keyword(s):  
Collective Bargaining ◽  
Major League Baseball ◽  
Revenue Sharing ◽  
Collective Bargaining Agreement ◽  
Tax Rates ◽  
Marginal Revenue ◽  
Marginal Revenue Product ◽  
Major League ◽  
Salary Distribution ◽  
Revenue Product

This article analyzes how changes made to the revenue sharing agreement in the 2007 Major League Baseball collective bargaining agreement influenced the salaries of position players and pitchers. The tax rates associated with revenue sharing decreased following ratification of the 2007 agreement. Theoretically, these changes should increase players’ marginal revenue product and, therefore, salaries. Results indicate that position players experienced an increase in salary following the 2007 agreement. Pitchers’ salaries also increased, but by a smaller amount. The effect of the 2007 agreement was different throughout the salary distribution for position players, but uniform throughout the distribution for pitchers.

scholarly journals Of Bricks and Bats: New Stadiums, Talent Supply, and Team Performance in Major League Baseball

2017 ◽  
Vol 20 (1) ◽  
pp. 3-24 ◽  
Author(s):  
Duane W. Rockerbie ◽  
Stephen T. Easton
Keyword(s):  
Team Performance ◽  
Major League Baseball ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Empirical Results ◽  
Major League ◽  
Sports Team ◽  
Budget Decision ◽  
New Facility

This article considers whether publicly financed new facility investments encourage professional sports team owners to increase their investments in costly talent. We develop a model of a sports league that incorporates publicly financed facility investments, the unique characteristics of the talent market, and revenue sharing to explore the complementarity between new facility amenities, the team budget decision, and team performance. Our empirical results suggest that publicly financed new stadiums do little to improve team performance, not due to restrictions in the talent market, but rather due to a lack of fan response.

scholarly journals Revenue Sharing and Collusive Behavior in the Major League Baseball Posting System

Economies ◽  
2020 ◽  
Vol 8 (3) ◽  
pp. 71
Author(s):  
Duane W. Rockerbie
Keyword(s):  
Major League Baseball ◽  
Revenue Sharing ◽  
The United States ◽  
Auction Theory ◽  
Professional Baseball ◽  
Transfer System ◽  
Baseball Players ◽  
Side Payments ◽  
Major League ◽  
European Football

This paper uses auction theory to explain the unique design of the 1998–2013 posting system agreed to between Major League Baseball and the Japanese Nippon Professional Baseball League that allowed for the transfer of baseball players from Japan to the United States. It has some similarities and many differences from the transfer system used to obtain players in European football. The unique features of the posting system were a compromise between Major League Baseball clubs and Nippon Professional Baseball clubs with the understanding that the former was a collusive group of club owners. Revenue sharing is a method to enforce a system of side payments to collusive bidders. It is then profit-maximizing to have the bidder with the highest net surplus from the player win the auction. Changes to the revenue sharing system used in Major League Baseball reduced the ability of club owners to bid for Japanese players, hence changes to the bidding rules of the posting system coincided at the same time.

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