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Market Size Disparity Moderates Competitive Balance Interventions in US Sports Leagues

Author

Listed:
  • Davis, Kyle

    (University of Oklahoma)

  • Ransom, Tyler

    (University of Oklahoma)

  • Black, Christopher

    (University of Oklahoma)

  • Larson, Daniel

    (University of Oklahoma)

Abstract

This study examines the extent to which market size disparity across franchises—measured as the coefficient of variation of MSA populations—moderates the effectiveness of competitive balance interventions (CBIs) in Major League Baseball (MLB), the National Football League (NFL), the National Basketball Association (NBA), and the National Hockey League (NHL) from 1967 to 2023. Using two-way fixed effects models with multiple balance measures, we find that CBI effectiveness depends on the distribution of market sizes across league members. Jointly adopting a salary cap and floor improves competitive balance at low levels of market size disparity but is ineffective at high levels. Revenue sharing shows limited effects. Luxury taxes are associated with worsened competitive balance in high-disparity leagues. Our findings demonstrate that market size disparity not only affects competitive balance directly but also determines which interventions succeed. These results have direct relevance to recent discourse on competitive balance in MLB.

Suggested Citation

  • Davis, Kyle & Ransom, Tyler & Black, Christopher & Larson, Daniel, 2026. "Market Size Disparity Moderates Competitive Balance Interventions in US Sports Leagues," IZA Discussion Papers 18491, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18491
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    References listed on IDEAS

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    1. El-Hodiri, Mohamed & Quirk, James, 1971. "An Economic Model of a Professional Sports League," Journal of Political Economy, University of Chicago Press, vol. 79(6), pages 1302-1319, Nov.-Dec..
    2. Brad R. Humphreys, 2002. "Alternative Measures of Competitive Balance in Sports Leagues," Journal of Sports Economics, , vol. 3(2), pages 133-148, May.
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    Keywords

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    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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