Progressive Revenue Sharing in MLB: The Effect on Player Transfers

The 1997 collective bargaining agreement between the Major League Baseball owners and players’ union altered MLB’s system of sharing revenue sharing between clubs. The new system, a convoluted cross-subsidization scheme, by design progressively redistributed income from the highest revenue generating clubs toward the lowest revenue-producing clubs. The 2003 agreement extended this method of revenue redistribution, but with an increased the tax rate and modified process. The purpose of the revenue sharing system was to alleviate a growing disparity in revenue generation, which MLB claimed caused competitive imbalance. We examine progressive revenue sharing theoretically, within the principal-agent framework, and shows that the incentive to divest in talent is increased for lower revenue producing clubs. Empirical results are supportive. Payroll disparity and competitive imbalance increased modestly from the period immediately preceding implementation. Most striking however is the alteration in transfer rates of players, in particular the increased flow of productive talent away from the lowest revenue clubs. We show conclusively that low revenue producing clubs acted on the increased incentives to divest in talent.Sport, revenue redistribution, collective bargaining

Why the Master? Human Capital Development for Practicing U.S. Cycling Coaches

The economic structure of the industry of cycling coaches has yet to be the subject of any apparent published inquiry. This study describes the basic characteristics of practicing cycling coaches and presents economic models of the determinants of commercial success for individual coaches. Data were collected through an independent survey of current and former U.S.A. Cycling (USAC) coaches in 2010 (N = 386). Results of ordinary least squares and negative-binomial regression models suggest that coaching and competitive experience are associated with larger clienteles, but formal human capital investments do not generally add to a coach\u27s ability to garner more clients. Additionally, the study also explored the effects of reputation and experiential learning by using three subgroups of sport levels for dependent variables (i.e., recreational, developmental, and ProAm). These client groupings displayed different patterns of associated coach characteristics

Faculty Productivity, Seniority, and Salary Compression

For decades, many senior professors have noticed that the earnings of entry-level faculty are often very close to, or greater than their own. This trend in faculty life-cycle earnings can be illustrated by the 1998 salary and seniority data obtained from a public, liberal arts college (PLAC) that are reported in Table 1. Salary compression is evidenced by the narrow earnings difference ($2,300) between the highest-paid assistant professor and the lowest-paid full professor in this department. Salary inversion can be illustrated by differences in the averages, or in the range of salaries between assistant and associate professors. For example, the average assistant professor in Department X earns approximately$200 more than the average associate professor. Also, the highest paid assistant in this department earns $2,000 more than the highest-paid associate. These data indicate a U-shaped wage-tenure profile. Such a profile suggests that faculty with low levels of seniority can expect their earnings to fall, or invert, relative to the salaries of new hires as their careers unfold at this institution. Similarly, the earnings gap between new hires and faculty with high levels of seniority will compress over time.Productivity; Salary; Seniority

Motivating long-term employment contracts: risk management in major league baseball

Long-term employment contracts have typically been modeled as mechanisms whereby workers reduce the risk of lost income with a guaranteed long-term wage that is less than the expected spot wage. Examination of contract length among major league baseball players shows that long-term contracts for marginal players, those for whom it would seem most logical to desire this insurance, are rarely observed. Star players, whose income levels should enable them to purchase this sort of insurance from other sources, represent the majority of long-term contract holders. This paper presents a theoretical model showing that firms, when facing both market uncertainty and uncertainty about an employee's future productivity, have an incentive to reallocate risk with long-term labor contracts. In such cases, a long-term contract may be observed without a risk premium paid by the worker. The labor markets of professional sports represent this combination of market and productive uncertainty. Empirical results from major league baseball using a binary choice probit model, which corrects for sample selection bias, support the hypothesis that factors, which increase market uncertainty and reduce productive uncertainty, are consistent with the observation of long-term contracts. Copyright © 2004 John Wiley & Sons, Ltd.

The Demise of African American Baseball Leagues: A Rival League Explanation

Organized African American baseball (AAB), the longest lived rival to Major League Baseball (MLB) in history, thrived from the 1920s through the early 1940s. Although integration in 1947 focused attention on MLB and the American experience, the impact on AAB receives only passing, somewhat wistful notice. From the economic perspective, the unabashed talent raiding by MLB killed AAB a couple of years after integration began. The authors show that AAB did pose an economic threat to MLB. Given this, the theory and history of MLB behavior toward rival leagues would have predicted actions by MLB to end the threat posed by AAB and a better economic outcome for at least some of the AAB owners and players than actually occurred. Although the former occurred, the latter never materialized for AAB. Competitive baseball was lost to countless thousands of fans throughout the South and Midwest, profitable businesses were lost to African American and White AAB team owners, and hundreds of African American players were denied a "big league" livelihood as the result of integration. The general perception is that integration was a positive thing but costly to many.History

The Role of Sport Economics in the Sport Management Curriculum

Sports economics has emerged as a clearly denned field in the past five years, and sports economists have recently begun taking up positions in sport management programs. We explore the sports economics-sport management nexus. A survey of U.S. sport management programs and their curricula reveals that sports economics is not widely required by sport management programs, despite the inclusion of "economics in sport" in widely accepted sport management curricular guidelines. Sport management programs have recently experienced trouble filling vacant positions, and new PhDs in sport management lack adequate research preparation, while economics produces a large number of PhDs and sports economics is a growing field. Taken together, these factors suggest that sports economics may play an important role in the sport management curriculum in the future.sport economics curriculum survey of course offerings

New insights on the Louis-Schmeling paradox: determinants of demand for subscription and pay-per-view boxing

Research question Studies considering demand for professional boxing are almost completely absent from the Sport Management/Sports Economics literature. Little is known about consumer preferences for a sport which attracts global attention but is unique insofar as it is exempt from standard sporting institutions maintaining competitive balance. We use two new datasets to ask, what are the determinants of main event viewership (Nielsen ratings) and pay-per-views buys? In addressing this question we offer new insights on the uncertainty-of-outcome hypothesis and extend research on direct demand for individual sport. Research methods The datasets comprise of 210HBOandShowtimebroadcasts from 2006 to 2018. We estimate generalised linear models, controlling for economic determinants, bout features, boxer popularity and scheduling factors. Results and Findings For main events, we find conflicting evidence to the uncertainty-of-outcome hypothesis. Fans show a preference for rematches, domestic boxers and heavier divisions. NFL broadcasts and earlier scheduling negatively impact viewership. For pay-per-views, we find a positive price effect. Expectedly, Floyd Mayweather Jr increases buys. Both categories exhibit a negative trend with viewership and PPV buys declining over the sampling frame. Implications The results offer new evidence that is contrary to the uncertainty-of-outcome hypothesis for an individual sport. The findings point to differences in consumer preferences between two sources of demand for the same sport. Practically, these can inform the strategic decision-making of broadcasters, promoters, advertisers and potential new broadcasting entrants

Happiness as a Reward for Torture: Is Participation in a Long-Distance Triathlon a Rational Choice?

Maxcy J, Wicker P, Prinz J. Happiness as a Reward for Torture: Is Participation in a Long-Distance Triathlon a Rational Choice? Journal of Sports Economics. 2019;20(2):177-197.This study applies prospect theory to an assessment of actual behavior. Loss aversion, reference dependence, and diminishing sensitivity are conceptualized through survey respondents’ perceptions of physical and mental torture during training for and competition in long-distance triathlons. Regression results show that frequent thoughts of giving up during the race negatively affect happiness after the race, while mental torture during training and race is negatively associated with happiness in the weeks after the race. Satisfaction with race outcome positively affects happiness, suggesting that achieving individual goals is more important than absolute performance in terms of finishing times and ranks