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

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.

Evaluating Pure Neoclassical Wage Exploitation Among Workforce Differentiated by Gender and Occupations in Singapore

The exploitation of workers can have disastrous consequences for society since their employers' wage exploitation may adversely influence living standards. Under such circumstances, the percentage of poverty and crime would rise. Due to the importance of adverse impacts of wage exploitation on workers' livelihoods, this study analyzes the concept of pure exploitation in Singapore during the period from 2011 to 2018. To accomplish this aim, the marginal revenue product (MRP) and average revenue product (ARP) of the gender and occupational groups defined by this study are compared to the groups' wages. The existence of pure exploitation among the groups, according to the obtained results, has been demonstrated. The findings also indicate that the female groups' degree of wage exploitation has been more significant than the male groups' figure.

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

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.

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

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.

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

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.

Productivity, Rents, and the Salaries of Group of Five Football Coaches

Standard labor market theory says that workers are paid their marginal revenue product (MRP). However, firm revenue is sometimes independent of the productivity of individual workers. This often occurs in professional sports, as the bulk of a team’s revenue comes from league-wide TV contracts negotiated years in advance. This is also true for head coaches at “Group of Five” schools, which form the second tier of college football programs. We show that a coach’s performance affects both his MRP and his bargaining power over the division of exogenous rents that accrue to his program.