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Multiple Equilibria and Unsustainable Runs in Major League Baseball: More Evidence

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  • Rockerbie, Duane
  • Easton, Stephen

Abstract

Teams that operate in professional sports leagues often display a cyclical pattern in team winning percentages that are driven by the payroll choices of owners that are inconsistent with a single, stable equilibrium. Two explanations emerge: a stable equilibrium that is shifting over time due to shifts of the revenue or payroll function; or moving between two stable equilibriums. We employ the Bounds test for cointegration between relative team revenues and payrolls to detect multiple equilibria in a sample of Major League Baseball teams over the 1990-2018 seasons. The results suggest the possibility of multiple equilibria for five teams even after accounting for moves to new stadiums that shift the team revenue function.

Suggested Citation

  • Rockerbie, Duane & Easton, Stephen, 2021. "Multiple Equilibria and Unsustainable Runs in Major League Baseball: More Evidence," MPRA Paper 109971, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:109971
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    References listed on IDEAS

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    JEL classification:

    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
    • Z0 - Other Special Topics - - General

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