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 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.

Quantile Insights on Market Structure and Worker Salaries: The Case of Major League Baseball

2019 ◽  
Vol 20 (8) ◽  
pp. 1066-1087 ◽  
Author(s):  
Rodney Fort ◽  
Young Hoon Lee ◽  
Taeyeon Oh
Keyword(s):  
Empirical Investigation ◽  
Major League Baseball ◽  
Marginal Revenue ◽  
Total Revenue ◽  
Marginal Revenue Product ◽  
Major League ◽  
Independent Variable ◽  
The Impact ◽  
Do So ◽  
Revenue Product

The vast majority of the empirical investigation of player marginal revenue product (MRP) and monopsony exploitation rates (MER) implicitly assumed that MRP is constant across the revenue distribution of teams. The few works that do attempt to capture the impact of revenue variation across teams do so via independent variable specification. We bring quantile estimation to bear that allows MRP to vary across the entire revenue distribution in Major League Baseball. Completely in keeping with economic common sense, MRP increases as total revenue rises (to higher and higher quantiles). As with past findings, there is interesting MER dispersion over the length of player tenure in the league and between star and mediocre players. Heretofore unexplored, we also find interesting dispersion in MRP and MER between larger revenue and smaller revenue markets. Our results suggest that independent variable specifications overstate MRP and MER for smaller revenue teams and understate the same for larger revenue team.

How Much Did Baseball’s Antitrust Exemption Cost Bob Gibson?

2019 ◽  
Vol 64 (4) ◽  
pp. 566-583 ◽  
Author(s):  
David J. Berri ◽  
Anthony C. Krautmann
Keyword(s):  
Major League Baseball ◽  
Free Agency ◽  
Baseball Players ◽  
Marginal Revenue Product ◽  
The Supreme Court ◽  
Antitrust Laws ◽  
Major League ◽  
Hall Of Fame ◽  
Baseball Team ◽  
Revenue Product

Major League Baseball was granted an exemption to antitrust laws in 1922 by the Supreme Court. This exemption led to the creation of a monopsonistic labor market that prevented baseball players from fielding offers from other organizations once that player signed with any Major League Baseball team. Economic theory predicts that such a market would reduce a worker’s wage below a worker’s marginal revenue product. The question this study seeks to address is how much wage depression existed before the introduction of free agency in baseball in 1976. Specifically, we will examine the Hall-of-Fame career of Bob Gibson, a career that ended in 1975. Our examination will not only explore the standard approach economists have used to answer this question for more than forty years but also a simpler approach that gives a more realistic answer to the question.

An examination of Oliver’s product loyalty framework

2016 ◽  
Vol 17 (2) ◽  
pp. 94-109 ◽  
Author(s):  
Galen T. Trail ◽  
Jeffrey D. James ◽  
Hyungil Kwon ◽  
Dean Anderson ◽  
Matthew J. Robinson
Keyword(s):  
Social Support ◽  
Major League Baseball ◽  
Two Dimensions ◽  
Media Consumption ◽  
Content Type ◽  
Self Identity ◽  
Season Ticket ◽  
Identity Group ◽  
Two Samples ◽  
Major League

Purpose – The purpose of this paper is to test Oliver’s two-dimension (fortitude and community/social support) product loyalty framework. Design/methodology/approach – Oliver categorized each of the two dimensions into high and low, creating a two-by-two framework: low fortitude and low-community/social support (Product Superiority group); low fortitude and high-community/social support (Village Envelopment group); high fortitude and low-community/social support (Determined Self-isolation group); high fortitude and high-community/social support (Immersed Self-identity group). The paper uses two samples. The sample from Study 1 was season ticket holders (n=199) of a West Coast (USA) Major League Baseball team. Results indicated preliminary support for Oliver’s four groups and good psychometric properties of the fan community scale and the individual fortitude scale (IFS). Study 2 focussed on attendees (n=458) at two East Coast (USA) Major League Baseball venues. Findings – The multivariate GLM indicated significant differences among Oliver’s groups, but the variance explained was small on past, current, and future attendance. However, in terms of actual games attended, the Immersed Self-identity group attended between 2.5 and 3 times as many games as the Village Envelopment group over the two years, and more than twice as many games as the Product Superiority group. The groups differed substantially on consumption of product extensions: 22.5 percent of the variance in merchandise purchasing was explained by the grouping, 31.9 percent of broadcast media consumption, and 24.9 percent of print media consumption. In all cases, those in the Immersed Self-identity group consumed significantly more than the Product Superiority and Determined Self-isolation groups. Originality/value – The paper reveals that sport marketers can focus on the Immersed Self-identity segment as the segment most likely to consume the product, repurchase, and purchase product extensions.

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.

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