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Free Agency, Competitive Balance, and Diminishing Returns to Pennant Contention

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  • Eckard, E Woodrow

Abstract

This article argues that the 1976 introduction of free agency increased competitive balance in Major League Baseball. The evidence is based on a new empirical measure that captures the key dynamic element of balance: year-to-year fluctuations in team performance. My hypothesis is that diminishing returns to each additional year's "production" of a pennant-contending team reduces the incentive to bid continually for top players. Free agency allows talent to be reallocated more readily to potential new contenders, given that player sales had been restricted prior to 1976. The hypothesis is supported by evidence of declining attendance during contending "streaks." Copyright 2001 by Oxford University Press.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 39 (2001)
Issue (Month): 3 (July)
Pages: 430-43

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Handle: RePEc:oup:ecinqu:v:39:y:2001:i:3:p:430-43

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Cited by:
  1. Dennis Coates & Brad R. Humphreys, 2003. "Novelty Effects of New Facilities on Attendance at Professional Sporting Events," UMBC Economics Department Working Papers 03-101, UMBC Department of Economics.
  2. Stefan Szymanski, 2006. "The Champions League and the Coase Theorem," Working Papers 0617, International Association of Sports Economists & North American Association of Sports Economists.
  3. Jeroen Schokkaert & Johan Swinnen, 2013. "European Cup football has experienced a major change in format with the introduction of the Champions League in 1992 and a major change in admission rules with direct qualification for multiple teams ," LICOS Discussion Papers 32913, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  4. Daniel Mizak & Anthony Stair & John Neral, 2007. "The adjusted churn: an index of competitive balance for sports leagues based on changes in team standings over time," Economics Bulletin, AccessEcon, vol. 26(3), pages 1-7.
  5. Booth, Ross, 2005. "Comparing Competitive Balance in Australian Sports Leagues: Does a Salary Cap and Player Draft Measure Up?," Sport Management Review, Elsevier, vol. 8(2), pages 119-143, September.
  6. Jennifer K. Ashcraft & Craig A. Depken, II, 2007. "The Introduction of the Reserve Clause in Major League Baseball: Evidence of its Impact on Select Player Salaries During the 1880s," Working Papers 0710, International Association of Sports Economists & North American Association of Sports Economists.
  7. Yamamura, Eiji, 2010. "Game Information, Local Heroes, And Their Effect On Attendance: The Case Of The Japanese Baseball League," MPRA Paper 21278, University Library of Munich, Germany.
  8. Young Lee & Rodney Fort, 2008. "Attendance and the Uncertainty-of-Outcome Hypothesis in Baseball," Review of Industrial Organization, Springer, vol. 33(4), pages 281-295, December.
  9. Allen R. Sanderson & John J. Siegfried, 2003. "Thinking About Competitive Balance," Vanderbilt University Department of Economics Working Papers 0318, Vanderbilt University Department of Economics.
  10. Ross Booth, 2005. "Comparing Competitive Balance In Australian Sports Leagues, The Afl, Nbl And Nrl: Does The Afl'S Team Salary Cap And Player Draft Measure Up?," Development Research Unit Working Paper Series 02/05, Monash University, Department of Economics.
  11. Paul, Rodney J. & Weinbach, Andrew P., 2012. "Competitive balance in the NFL?," Edition HWWI: Chapters, in: Zur ├ľkonomik von Spitzenleistungen im internationalen Sport, pages 73-84 Hamburg Institute of International Economics (HWWI).

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