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Measuring Market Power in Professional Baseball, Basketball, Football, and Hockey

Author

Listed:
  • Gerald T. Healy III
  • Jing Ru Tan
  • Peter F. Orazem

Abstract

Using Forbes magazine’s estimates of the current value and revenues of professional sports teams, we derive a long-run variant of the Lerner Index. We apply the strategy to professional teams in baseball, basketball, football, and hockey over the 2006–2019 period. All teams have positive and significant price-cost margins over the entire period. Analysis of variance shows that local market factors and past team performance have less impact on a team’s market power than do common league-wide effects. The strongest market power is in leagues with more aggressive revenue sharing policies. Price-cost margins are higher for professional teams in North American than for the most valuable European soccer teams, consistent with the stronger exemption from antitrust law in the United States and the weaker revenue sharing policies in Europe. JEL Classifications : L43, L13, L83

Suggested Citation

  • Gerald T. Healy III & Jing Ru Tan & Peter F. Orazem, 2020. "Measuring Market Power in Professional Baseball, Basketball, Football, and Hockey," The American Economist, Sage Publications, vol. 65(2), pages 214-231, October.
    • Handle: RePEc:sae:amerec:v:65:y:2020:i:2:p:214-231
    DOI: 10.1177/0569434520941505
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    References listed on IDEAS

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    More about this item

    Keywords

    market power; Lerner Index; revenue sharing; local markets; price-cost margin; antitrust;
    All these keywords.

    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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