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Free-Agency and the Competitiveness of Major-League Baseball

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Author Info
Craig A. Depken II (The University of Texas at Arlington)

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Abstract

I investigate whether the removal of the reserve clause in professional baseball has affected the competitive nature of the industry in the context of whether teams are actively attempting to monopolize in high- valued inputs. It is possible that a very few teams could purchase all of the best players over time leading to a highly concentrated industry in certain production categories and adversely affect the competitive nature of the industry. To investigate this possibility, I calculate the Herfindahl-Hirschman Index for homeruns and strikeouts in professional baseball from 1920 to 1993, and relate them to structural changes in baseball. I isolate the structural effect of free-agency and find no evidence that free agency has altered the competitive nature of the industry. My findings support those in Hylan, Lage and Treglia (1996).

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Publisher Info
Paper provided by EconWPA in its series Industrial Organization with number 9610001.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 33 pages
Date of creation: 01 Oct 1996
Date of revision: 31 Oct 1996
Handle: RePEc:wpa:wuwpio:9610001

Note: Type of Document - Tex; prepared on IBM PC - PC-TEX; to print on PostScript; pages: 33 ; figures: included
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Web page: http://129.3.20.41

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Related research
Keywords: concentration; competitiveness; baseball; free agency;

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Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Recreation; Tourism

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Geroski, P A, 1981. "Specification and Testing the Profits-Concentration Relationship: Some Experiments for the UK," Economica, London School of Economics and Political Science, vol. 48(191), pages 279-88, August. [Downloadable!] (restricted)
  2. Sullivan, Daniel, 1985. "Testing Hypotheses about Firm Behavior in the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 586-98, June. [Downloadable!] (restricted)
  3. Gilbert, R Alton, 1984. "Bank Market Structure and Competition: A Survey," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 617-44, November. [Downloadable!] (restricted)
  4. Sumner, Daniel A, 1981. "Measurement of Monopoly Behavior: An Application to the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 1010-19, October. [Downloadable!] (restricted)
  5. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
  6. Severin Borenstein, 1989. "Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 344-365, Autumn. [Downloadable!] (restricted)
  7. Marvel, Howard P, 1978. "Competition and Price Levels in the Retail Gasoline Market," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 252-58, May. [Downloadable!] (restricted)
  8. Evans, William N & Kessides, Ioannis N, 1993. "Localized Market Power in the U.S. Airline Industry," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 66-75, February. [Downloadable!] (restricted)
  9. Drahozal, Christopher R., 1986. "The impact of free agency on the distribution of playing talent in major league baseball," Journal of Economics and Business, Elsevier, vol. 38(2), pages 113-121, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Allen R. Sanderson & John J. Siegfried, 2003. "Thinking About Competitive Balance," Working Papers 0318, Department of Economics, Vanderbilt University. [Downloadable!]
  2. Aju Fenn & Peter Allmen & Stacey Brook & Thomas Preissing, 2005. "The Influence of Structural Changes and International Players on Competitive Balance in the NHL," Atlantic Economic Journal, International Atlantic Economic Society, vol. 33(2), pages 215-224, June. [Downloadable!] (restricted)
  3. 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. [Downloadable!]
  4. Stefan Szymanski, 2006. "The Champions League and the Coase Theorem," Working Papers 0617, International Association of Sports Economists. [Downloadable!]
    Other versions:
  5. Martin Schmidt & David Berri, 2002. "Competitive Balance and Market Size in Major League Baseball: A Response to Baseball's Blue Ribbon Panel," Review of Industrial Organization, Springer, vol. 21(1), pages 41-54, August. [Downloadable!] (restricted)
  6. Anthony C. Krautmann & Lawrence Hadley, 2006. "Dynasties versus pennant races: competitive balance in major league baseball," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 287-292. [Downloadable!]
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