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Player Salaries, Organizational Efficiency, and Competitiveness in Major League Baseball

Author

Listed:
  • Herbert F. Lewis

    (Stony Brook University)

  • Thomas R. Sexton

    (Stony Brook University)

  • Kathleen A. Lock

    (Stony Brook University)

Abstract

The dramatic growth of free agency in Major League Baseball has caused great concern about the competitiveness of some teams, particularly those in smaller markets. The authors use a two-stage data envelopment analysis model as part of a larger analysis to determine the minimum total player salary required to be competitive in each nonstrike year since 1985. They then examine trends in this salary and determine how many teams were noncompetitive each year because of low total player salary. Finally, they examine the relationship between competitiveness and market size. The authors find evidence that the number of times that a team has been noncompetitive because of low total player salary between 1985 and 2002 is negatively related to the size of the market in which it plays. The authors also find that large market teams are more likely to overspend on player salaries than are small market teams.

Suggested Citation

  • Herbert F. Lewis & Thomas R. Sexton & Kathleen A. Lock, 2007. "Player Salaries, Organizational Efficiency, and Competitiveness in Major League Baseball," Journal of Sports Economics, , vol. 8(3), pages 266-294, June.
    • Handle: RePEc:sae:jospec:v:8:y:2007:i:3:p:266-294
    DOI: 10.1177/1527002506286776
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    References listed on IDEAS

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    2. Wiseman Frederick & Chatterjee Sangit, 2010. "Negotiating Salaries through Quantile Regression," Journal of Quantitative Analysis in Sports, De Gruyter, vol. 6(1), pages 1-15, January.
    3. Boon L. Lee & Andrew C. Worthington, 2013. "A note on the ‘Linsanity’ of measuring the relative efficiency of National Basketball Association guards," Applied Economics, Taylor & Francis Journals, vol. 45(29), pages 4193-4202, October.
    4. Terry, Ryan P. & McGee, Jeffrey E. & Kass, Malcolm J., 2018. "The not-so-free agent: Non-performance factors that contribute to free agent compensation premiums," Sport Management Review, Elsevier, vol. 21(2), pages 189-201.
    5. Franziska Prockl & Bernd Frick, 2018. "Wage Determination In A Regulated Labor Market: Empirical Evidence From Major League Soccer," Working Papers Dissertations 39, Paderborn University, Faculty of Business Administration and Economics.
    6. An‐Pang Wang & Che‐Wei Chang & Juin‐Ming Tsai & Shiu‐Wan Hung, 2021. "A performance evaluation of Major League Baseball teams: An integrated social network and data envelopment analysis," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(6), pages 1421-1434, September.
    7. Lewis, Herbert F. & Lock, Kathleen A. & Sexton, Thomas R., 2009. "Organizational capability, efficiency, and effectiveness in Major League Baseball: 1901-2002," European Journal of Operational Research, Elsevier, vol. 197(2), pages 731-740, September.
    8. Yanzhi Bi, 2021. "Analyzing the performance of the Major League Baseball Teams by using the Data Envelopment Analysis," Business & Entrepreneurship Journal, SCIENPRESS Ltd, vol. 10(1), pages 1-1.

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