Moving the Needle in MMA: On the Marginal Revenue Product of UFC Fighters

2019 ◽  
Vol 21 (2) ◽  
pp. 176-209 ◽  
Author(s):  
Paul Gift
Keyword(s):  
Consumer Search ◽  
Google Trends ◽  
Marginal Revenue ◽  
Search Activity ◽  
Marginal Revenue Product ◽  
Ultimate Fighting Championship ◽  
Over Time ◽  
Revenue Product

This article analyzes fighter marginal products (MP) and marginal revenue products (MRP) for the largest component of Ultimate Fighting Championship (UFC) revenues: content. Most bouts are fought in the presence of fixed content revenues, and most fighters go their entire careers without supplying labor services for variable revenue pay-per-view (PPV) main cards. After demonstrating that winning does not sufficiently explain variation in PPV buys, I estimate fighter MP and MRP using U.S. consumer search activity from Google Trends as a proxy for fighter popularity. Results suggest that a sizable percentage of UFC fighters generated little to no MRP, while a small number of PPV main card fighters were responsible for 75% of aggregate MRP. Other PPV main card fighters who did not drive the majority of MRP appeared to generate more than some compensation estimates. An apparent decline over time in the UFC’s inframarginal consumer base is also discussed.

Are the Lowest-Paid UFC Fighters Really Overpaid? A Comment on Gift (2019)

2021 ◽  
pp. 152700252110497
Author(s):  
Kevin Caves ◽  
Ted Tatos ◽  
Augustus Urschel
Keyword(s):  
Measurement Error ◽  
Recent Article ◽  
Dominant Role ◽  
Economic Value ◽  
Google Trends ◽  
Marginal Revenue ◽  
Marginal Revenue Product ◽  
Ultimate Fighting Championship ◽  
Revenue Streams ◽  
Revenue Product

In a recent article in this Journal, Gift (2019) attempts to measure the marginal revenue product (MRP) of individual Ultimate Fighting Championship (UFC) fighters. According to Gift’s estimates, top-tier UFC Fighters are frequently and substantially underpaid relative to their MRP while “a sizable percentage of UFC fighters generated little to no MRP,” and are consequently “overpaid by traditional measures.” In this Comment, we examine possible explanations for this finding, including various limitations of Gift’s data and methods. We also examine the underlying economics of the sport, in which quasi-fixed broadcast revenue streams, ignored in Gift's MRP estimates, play a large and increasingly dominant role. As Berri et al. (2015 ) have emphasized, comparisons of athlete compensation and standard MRP metrics (even if estimated correctly) are “meaningless” in the presence of substantial quasi-fixed revenues. Critically, Gift assumes zero MRP for all fighters in all bouts in all non-Pay-Per-View (PPV) events. As a result, Gift's method assumes fighters are “overpaid” for the vast majority (75 percent) of fighter-bouts. Even setting this aside, we argue that Gift's use of Google Trends data—at best an extremely crude proxy for a fighter's contribution to PPV revenue—suffers from measurement error, producing attenuation bias. As a consequence, Gift's data and methods are likely to substantially underestimate UFC fighters’ economic value.

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 Estimating Relative Technical Efficiency in Barani Agriculture: Some Further Results

1995 ◽  
Vol 34 (4III) ◽  
pp. 913-924
Author(s):  
Himayat Ullah
Keyword(s):  
Technical Efficiency ◽  
Economic Efficiency ◽  
Marginal Cost ◽  
Allocative Efficiency ◽  
Farm Size ◽  
Marginal Revenue ◽  
Marginal Revenue Product ◽  
Main Components ◽  
Large Farms ◽  
Revenue Product

The concept of technical efficiency of farms has sufficiently been detailed in the literature on agricultural economic development since Farrell (1957) and has now widely been studied by, among others, Bardhan (1973); Kalirajan and Flinn (1983); Fare, Grosskopf and Lovell (1985); Battese, Coelli and Colbi (1989); Kalirajan (1990); Battese and Coelli (1992); Himayatullah, et al. (1994); and Bashir and Himayatullah (1994). The interest in relative economic efficiency emerged from the observation that labour intensity and yield are inversely related to farm size. Economists interpreted this result as an indication that either small and large farms faced different configurations of input and output prices, or small and large farms differed with respect to economic efficiency. Economic efficiency of a group of farms can be conceptualised as comprising two main components; technical efficiency and allocative efficiency. A group of farms may be considered technically more efficient than another group of farms if it can produce a given output with less of some or all inputs, and a group of farms may be considered allocatively more efficient than another group of farms if it is more successful in equating marginal revenue product with the marginal cost of inputs. More simply, technical efficiency involves the farm’s ability to obtain the maximum possible output from a given set of resources, and allocative efficiency concerns its ability to maximise profits by equating the marginal revenue product with the marginal cost of inputs. Specifically, a group of farms that uses the best combination of inputs achieves the maximum possible output and is superior to another group of farms which does not do the same, given a similar bundle of inputs.

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.

Sign in / Sign up

Export Citation Format

Share Document