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The Invariance Proposition in Baseball: New Evidence

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  • Rockerbie, Duane

Abstract

This paper considers the changes in revenue sharing that occurred prior to the 2007 season and its effects on parity via its effects on marginal revenues. Based on the results from an empirical specification for team revenue, we find evidence that the reduction in revenue sharing increased marginal revenue by approximately the same amount for both small and large market clubs despite other differences in how small and large market club revenues are determined. The upshot of this result is that the modest change in revenue sharing had little to no effect on league parity in the three seasons following its implementation. The well-known invariance proposition in the economics of sport literature that predicts this result appears to hold.

Suggested Citation

  • Rockerbie, Duane, 2011. "The Invariance Proposition in Baseball: New Evidence," MPRA Paper 55020, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:55020
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    File URL: https://mpra.ub.uni-muenchen.de/55020/1/MPRA_paper_55020.pdf
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    References listed on IDEAS

    as
    1. Krautmann, Anthony C, 1999. "What's Wrong with Scully-Estimates of a Player's Marginal Revenue Product," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 369-381, April.
    2. Scully, Gerald W, 1974. "Pay and Performance in Major League Baseball," American Economic Review, American Economic Association, vol. 64(6), pages 915-930, December.
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    4. Rodney Fort, 2010. "Observation, Replication, and Measurement in Sports Economics," Journal of Sports Economics, , vol. 11(1), pages 3-16, February.
    5. Jason Winfree & Rodney Fort, 2012. "Nash Conjectures and Talent Supply in Sports League Modeling," Journal of Sports Economics, , vol. 13(3), pages 306-313, June.
    6. Stefan Szymanski & Stefan KÈsenne, 2004. "Competitive balance and gate revenue sharing in team sports," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 165-177, March.
    7. E. Woodrow Eckard, 2001. "Baseball’s Blue Ribbon Economic Report," Journal of Sports Economics, , vol. 2(3), pages 213-227, August.
    8. Stefan KÉsenne, 2004. "Competitive Balance and Revenue Sharing," Journal of Sports Economics, , vol. 5(2), pages 206-212, May.
    9. Stephen T. Easton & Duane W. Rockerbie, 2005. "Revenue Sharing, Conjectures, and Scarce Talent in a Sports League Model," Journal of Sports Economics, , vol. 6(4), pages 359-378, November.
    10. Jason Winfree & Jill McCluskey & Ron Mittelhammer & Rodney Fort, 2004. "Location and attendance in major league baseball," Applied Economics, Taylor & Francis Journals, vol. 36(19), pages 2117-2124.
    11. KÉSENNE, Stefan, "undated". "Revenue sharing and competitive balance. Does it invariance proposition hold?," Working Papers 2003021, University of Antwerp, Faculty of Applied Economics.
    12. repec:ebl:ecbull:v:1:y:2003:i:2:p:1-10 is not listed on IDEAS
    13. Frederick Wiseman & Sangit Chatterjee, 2003. "Team payroll and team performance in major league baseball: 1985-2002," Economics Bulletin, AccessEcon, vol. 1(2), pages 1-10.
    14. Rockerbie, Duane, 2007. "Free Agent Auctions and Revenue Sharing: A Simple Approach," MPRA Paper 2218, University Library of Munich, Germany.
    15. Bresnahan, Timothy F, 1981. "Duopoly Models with Consistent Conjectures," American Economic Review, American Economic Association, vol. 71(5), pages 934-945, December.
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    Cited by:

    1. Rockerbie, Duane W, 2012. "Exploring inter-league parity in North America: the NBA anomaly," MPRA Paper 43088, University Library of Munich, Germany.

    More about this item

    Keywords

    baseball; revenue sharing; parity;

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L8 - Industrial Organization - - Industry Studies: Services
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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