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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.

Suggested Citation

  • Eckard, E Woodrow, 2001. "Free Agency, Competitive Balance, and Diminishing Returns to Pennant Contention," Economic Inquiry, Western Economic Association International, vol. 39(3), pages 430-443, July.
  • Handle: RePEc:oup:ecinqu:v:39:y:2001:i:3:p:430-43
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    Cited by:

    1. Paul, Rodney J. & Weinbach, Andrew P., 2012. "Competitive balance in the NFL?," Edition HWWI: Chapters,in: Zur Ökonomik von Spitzenleistungen im internationalen Sport, pages 73-84 Hamburg Institute of International Economics (HWWI).
    2. 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.
    3. 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?," Monash Economics Working Papers 02/05, Monash University, Department of Economics.
    4. 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.
    5. yamamura, eiji, 2008. "Game Information, Local Heroes, And Their Effect On Attendance: The Case Of The Japanese Baseball League," MPRA Paper 10303, University Library of Munich, Germany.
    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. 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.
    8. Young Lee & Rodney Fort, 2008. "Attendance and the Uncertainty-of-Outcome Hypothesis in Baseball," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 33(4), pages 281-295, December.
    9. Akihiko Kawaura & Sumner J. La Croix, 2007. "The Designated Hitter Rule and Team Defensive Strategy in Japan's Professional Baseball Leagues," Journal of Sports Economics, , vol. 8(5), pages 491-504, October.
    10. Jeroen Schokkaert & Johan Swinnen, 2013. "It is Harder, not Easier, to Predict the Winner of the Champions League," LICOS Discussion Papers 32913, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    11. Manasis Vasileios & Ntzoufras Ioannis, 2014. "Between-seasons competitive balance in European football: review of existing and development of specially designed indices," Journal of Quantitative Analysis in Sports, De Gruyter, vol. 10(2), pages 1-14, June.
    12. Jan Šíma, 2013. "Static Competitive Balance of Three Chosen Central European Football Leagues," Ekonomika a Management, University of Economics, Prague, vol. 2013(4).
    13. Fort, Rodney & Maxcy, Joel & Diehl, Mark, 2016. "Uncertainty by regulation: Rottenberg׳s invariance principle," Research in Economics, Elsevier, vol. 70(3), pages 454-467.
    14. Eiji Yamamura, 2011. "Game Information, Local Heroes, and Their Effect on Attendance: The Case of the Japanese Baseball League," Journal of Sports Economics, , vol. 12(1), pages 20-35, February.
    15. Stefan Szymanski, 2007. "The Champions League And The Coase Theorem," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(3), pages 355-373, July.

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