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Market size and the demand for talent in major league baseball

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  • Anthony Krautmann
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    Abstract

    In this article, we look at how revenues affect the personnel decisions of Major League Baseball (MLB) teams. It is well established that teams with the strongest demands end up with the top stars and deepest benches, thus the best chance of winning. Since a team's demand for talent is its Marginal Revenue Product, the critical test is whether large-market teams have a greater Marginal Revenue (MR). Controlling for the impact of re-distributional efforts by MLB, we find that the MR of a large-market team is about 50% larger than that of a small-market team. Furthermore, we find that re-distributive efforts have a more severe effect on small-market teams. “Are the New York Yankees a dynasty because they outsmarted everyone? No, they just outspent everyone.” Sam Smith, Chicago Tribune

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 41 (2009)
    Issue (Month): 25 ()
    Pages: 3267-3273

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    Handle: RePEc:taf:applec:v:41:y:2009:i:25:p:3267-3273

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    Cited by:
    1. Rockerbie, Duane W, 2012. "Exploring inter-league parity in North America: the NBA anomaly," MPRA Paper 43088, University Library of Munich, Germany.

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