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The invariance principle in baseball: new evidence

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  • Duane W. Rockerbie

Abstract

This article considers the change in revenue sharing in Major League Baseball that occurred prior to the 2007 season and its effects on parity via its effects on marginal revenues. Based on the results from an empirical specification for team revenue, we find evidence that the reduction in revenue sharing increased marginal revenue by more for large market clubs than for small market clubs, despite holding constant other differences in how small and large market club revenues are determined. The upshot of this result is that the modest reduction in revenue sharing could have worsened league parity by 11 to 17 points in winning percentage between small and large market clubs, although other factors affect parity as well. The well-known invariance principle in the economics of sport literature does not appear to hold; however, the current consensus of theoretical models is not confirmed.

Suggested Citation

  • Duane W. Rockerbie, 2018. "The invariance principle in baseball: new evidence," Applied Economics, Taylor & Francis Journals, vol. 50(23), pages 2613-2621, May.
    • Handle: RePEc:taf:applec:v:50:y:2018:i:23:p:2613-2621
    DOI: 10.1080/00036846.2017.1403561
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    Cited by:

    1. Duane Rockerbie & Stephen Easton, 2018. "Revenue Sharing in Major League Baseball: The Moments That Meant so Much," IJFS, MDPI, vol. 6(3), pages 1-16, August.

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