The Invariance Proposition in Baseball: New Evidence
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.
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