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Measuring Cost Efficiency

In: Frontiers in Major League Baseball

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  • John Ruggiero

    (University of Dayton)

Abstract

In this chapter, we extend the analysis by analyzing the cost efficiency of MLB teams. We apply the corrected DEA model introduced in Chap. 3 to analyze the relationship between team wins and team payroll. One of the concerns for competitive balance is the ability of large market teams to spend higher amounts to lure the better players. In 2009, the New York Yankees had a total payroll above $200 million, over $50 million above the second-place New York Mets. The median team payroll was only $80 million. Large market teams are able to generate more local revenue from attendance, advertising, television and radio fees, etc. In 2006, a new revenue sharing program was agreed upon to restore competitive balance; teams contribute approximately one third of their local revenue into a pool and the money is split among the teams.

Suggested Citation

  • John Ruggiero, 2011. "Measuring Cost Efficiency," Sports Economics, Management, and Policy, in: Frontiers in Major League Baseball, chapter 0, pages 29-38, Springer.
    • Handle: RePEc:spr:semchp:978-1-4419-0831-5_4
    DOI: 10.1007/978-1-4419-0831-5_4
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