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Revenue, Population, And Competitive Balance In Major League Baseball

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  • ELIZABETH GUSTAFSON
  • LAWRENCE HADLEY

Abstract

This article examines the impact of hometown market size on competitive balance in Major League Baseball. We use a four‐equation simultaneous model of win percent, team payroll, team total revenue, and team local revenue in order to avoid simultaneity bias in the estimates. Using two‐stage least squares, our results show that consolidated metropolitan statistical area population does have a statistically significant positive impact on local revenue. This leads to increased payroll, which has a significantly positive, but small, impact on win percent. Specifically, the estimated impact of an additional one million in population ranges from 0.233 to 1.126 additional wins per season. (JEL L38)

Suggested Citation

  • Elizabeth Gustafson & Lawrence Hadley, 2007. "Revenue, Population, And Competitive Balance In Major League Baseball," Contemporary Economic Policy, Western Economic Association International, vol. 25(2), pages 250-261, April.
    • Handle: RePEc:bla:coecpo:v:25:y:2007:i:2:p:250-261
    DOI: 10.1111/j.1465-7287.2007.00036.x
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    References listed on IDEAS

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    Cited by:

    1. Jacob Andrew Loree, 2016. "Determinants of Baseball Success: An Econometric Approach," Business and Economic Research, Macrothink Institute, vol. 6(2), pages 1-12, December.
    2. Bendickson, Joshua S. & Chandler, Timothy D., 2019. "Operational performance: The mediator between human capital developmental programs and financial performance," Journal of Business Research, Elsevier, vol. 94(C), pages 162-171.

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    JEL classification:

    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy

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