Salary Caps and Competitive Balance in Professional Sports Leagues
AbstractThis paper examines the effects of salary caps on competitive balance in professional sports leagues in the United States. We find no evidence to suggest that salary caps improve competitive balance, as measured by the variation in wins between the best and worst teams in a league in a given year, in any of the major sports leagues. Further, depending on the measure of competitive balance, it appears that salary caps decreased competitive balance in the NBA, which has specific components that differ from those of the NHL and NFL. The results also suggest that revenue sharing arrangements promote competitive balance in a manner that is consistent with economic theory.
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Bibliographic InfoArticle provided by Middle Tennessee State University, Business and Economic Research Center in its journal Journal for Economic Educators.
Volume (Year): 11 (2011)
Issue (Month): 2 (Fall)
salary caps; competitive balance; free agency; standard deviation; Herfindahl- Hirschman Index;
Find related papers by JEL classification:
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
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