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Simulation Evidence on Herfindahl-Hirschman Indices as Measures of Competitive Balance

Author

Listed:
  • Dorian Owen

    (Department of Economics, University of Otago, New Zealand)

  • Caitlin Owen

    (Department of Information Science, University of Otago, New Zealand)

Abstract

Measurement of the degree of competitive balance, how evenly teams are matched, is central to the economic analysis of professional sports leagues. A common problem with competitive balance measures, however, is their sensitivity to the number of teams and the number of matches played by each team, i.e., season length. This paper uses simulation methods to examine the effects of changes in season length on the distributions of several widely used variants of the Herfindahl- Hirschman index applied to wins in a season. Of the measures considered, a normalized measure, accounting for lower and upper bounds, and an adjusted measure perform best, although neither completely removes biases associated with different season lengths.

Suggested Citation

  • Dorian Owen & Caitlin Owen, 2017. "Simulation Evidence on Herfindahl-Hirschman Indices as Measures of Competitive Balance," Working Papers 1715, University of Otago, Department of Economics, revised Dec 2017.
  • Handle: RePEc:otg:wpaper:1715
    as

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    File URL: http://www.otago.ac.nz/economics/research/otago671741.pdf
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    References listed on IDEAS

    as
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    Cited by:

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    2. repec:beo:swcetp:23-12 is not listed on IDEAS
    3. Dejan Trifunovi? & Vito Pipitone, 0000. "Welfare Maximizing Competitive Balance: the Evidence from Top European Football leagues," Proceedings of International Academic Conferences 11113139, International Institute of Social and Economic Sciences.
    4. Dejan Trifunović & Bojan Ristić, 2023. "The Impact Of The Horizontal Distribution Of Media Rights Revenues In Sports Leagues On Competitive Balance," Shaping Post-COVID World – Challenges for Economic Theory and Policy, in: Aleksandra Praščević & Miomir Jakšić & Mihail Arandarenko & Dejan Trifunović & Milutin Ješić (ed.),Shaping Post-COVID World – Challenges for Economic Theory and Policy, chapter 12, pages 263-285, Faculty of Economics and Business, University of Belgrade.

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    More about this item

    Keywords

    Herfindahl-Hirschman; Competitive balance; Simulation;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • Z20 - Other Special Topics - - Sports Economics - - - General

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