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A Test of the Optimal Positive Production Network Externality in Major League Baseball

Author

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  • Daniel, Rascher

Abstract

Unlike most businesses, firms in a sports league need viable competitors. While a certain amount of domination is optimal, from an individual owners perspective, too much will result in league dissolution, and thus a lower utility for every owner. Hence, there is a limited positive production network externality. This paper examines the optimal level of the externality in professional baseball using data from each game of the 1996 MLB season. Both absolute and relative quality are important determinants of the demand for sports contests. In fact, fans prefer a game in which two high quality teams are competing, but the home team has approximately twice as good of a chance as the visiting team of winning.

Suggested Citation

  • Daniel, Rascher, 1999. "A Test of the Optimal Positive Production Network Externality in Major League Baseball," MPRA Paper 25832, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:25832
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    File URL: https://mpra.ub.uni-muenchen.de/25832/1/MPRA_paper_25832.pdf
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    References listed on IDEAS

    as
    1. Walter C. Neale, 1964. "The Peculiar Economics of Professional Sports," The Quarterly Journal of Economics, Oxford University Press, vol. 78(1), pages 1-14.
    2. Bruce R. Domazlicky & Peter M. Kerr, 1990. "Baseball Attendance and the Designated Hitter," The American Economist, Sage Publications, vol. 34(1), pages 62-68, March.
    3. Daniel Rascher, 1997. "A model of a professional sports league," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 3(3), pages 327-328, August.
    4. repec:kap:iaecre:v:3:y:1997:i:3:p:327-328 is not listed on IDEAS
    5. Jennett, Nicholas I, 1984. "Attendances, Uncertainty of Outcome and Policy in Scottish League Football," Scottish Journal of Political Economy, Scottish Economic Society, vol. 31(2), pages 176-198, June.
    6. Glenn Knowles & Keith Sherony & Mike Haupert, 1992. "The Demand for Major League Baseball: A Test of the Uncertainty of Outcome Hypothesis," The American Economist, Sage Publications, vol. 36(2), pages 72-80, October.
    7. Peel, David A & Thomas, Dennis A, 1988. "Outcome Uncertainty and the Demand for Football: An Analysis of Match Attendances in the English Football League," Scottish Journal of Political Economy, Scottish Economic Society, vol. 35(3), pages 242-249, August.
    8. Peter J. Sloane, 2000. "The Regulation of Professional Team Sports," IASE Conference Papers 0003, International Association of Sports Economists.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Men-Andri Benz & Leif Brandes & Egon Franck, 2009. "Do Soccer Associations Really Spend On A Good Thing? Empirical Evidence On Heterogeneity In The Consumer Response To Match Uncertainty Of Outcome," Contemporary Economic Policy, Western Economic Association International, vol. 27(2), pages 216-235, 04.
    2. Donald I. Price & Kabir C. Sen, 2003. "The demand for game day attendance in college football: an analysis of the 1997 Division 1-A season," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(1), pages 35-46.
    3. Drayer, Joris & Rascher, Daniel A. & McEvoy, Chad D., 2012. "An examination of underlying consumer demand and sport pricing using secondary market data," Sport Management Review, Elsevier, vol. 15(4), pages 448-460.
    4. Budzinski, Oliver & Feddersen, Arne, 2015. "Grundlagen der Sportnachfrage: Theorie und Empirie der Einflussfaktoren auf die Zuschauernachfrage," Ilmenau Economics Discussion Papers 94, Ilmenau University of Technology, Institute of Economics.
    5. Zulal Denaux & David Denaux & Yeliz Yalcin, 2011. "Factors Affecting Attendance of Major League Baseball: Revisited," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 39(2), pages 117-127, June.
    6. Martin Schmidt & David Berri, 2004. "Another look at competition: a regime-switching aproach," Applied Economics, Taylor & Francis Journals, vol. 36(21), pages 2453-2460.
    7. John C. Leadley & Zenon X. Zygmont, 2006. "When Is the Honeymoon Over? National Hockey League Attendance, 1970­2003," Canadian Public Policy, University of Toronto Press, vol. 32(2), pages 213-232, June.
    8. Stefan Szymanski, 2003. "The Economic Design of Sporting Contests," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1137-1187, December.
    9. Scott Tainsky & Jie Xu & Brian Mills & Steven Salaga, 2016. "How Success and Uncertainty Compel Interest in Related Goods: Playoff Probability and Out-of-Market Television Viewership in the National Football League," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 48(1), pages 29-43, February.
    10. David Forrest & Robert Simmons & Babatunde Buraimo, 2005. "Outcome Uncertainty And The Couch Potato Audience," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(4), pages 641-661, September.
    11. Coates, Dennis & Humphreys, Brad & Zhou, Li, 2012. "Outcome Uncertainty, Reference-Dependent Preferences and Live Game Attendance," Working Papers 2012-7, University of Alberta, Department of Economics.
    12. Rascher, Daniel & Rascher, Heather, 2004. "NBA Expansion and Relocation: A Viability Study of Various Cities," MPRA Paper 25740, University Library of Munich, Germany.
    13. Tony Caporale & Trevor Collier, 2015. "Are We Getting Better or Are They Getting Worse? Draft Position, Strength of Schedule, and Competitive Balance in the National Football League," Journal of Labor Research, Springer, vol. 36(3), pages 291-300, September.
    14. Rodney J. Paul & Kristin K. Paul & Michael Toma & Andrew Brennan, 2007. "Attendance in the NY-Penn Baseball League: Effects of Performance, Demographics, and Promotions," New York Economic Review, New York State Economics Association (NYSEA), pages 72-81.
    15. Stefan Szymanski, 2006. "Tilting the Playing Field: Why a sports league planner would choose less, not more, competitive balance," Working Papers 0620, International Association of Sports Economists;North American Association of Sports Economists.

    More about this item

    Keywords

    uncertainty of outcome; censored regression; cluster correlation; demand; baseball; network externality;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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