IDEAS home Printed from https://ideas.repec.org/a/sae/amerec/v65y2020i2p214-231.html
   My bibliography  Save this article

Measuring Market Power in Professional Baseball, Basketball, Football, and Hockey

Author

Listed:
  • Gerald T. Healy III
  • Jing Ru Tan
  • Peter F. Orazem

Abstract

Using Forbes magazine’s estimates of the current value and revenues of professional sports teams, we derive a long-run variant of the Lerner Index. We apply the strategy to professional teams in baseball, basketball, football, and hockey over the 2006–2019 period. All teams have positive and significant price-cost margins over the entire period. Analysis of variance shows that local market factors and past team performance have less impact on a team’s market power than do common league-wide effects. The strongest market power is in leagues with more aggressive revenue sharing policies. Price-cost margins are higher for professional teams in North American than for the most valuable European soccer teams, consistent with the stronger exemption from antitrust law in the United States and the weaker revenue sharing policies in Europe. JEL Classifications : L43, L13, L83

Suggested Citation

  • Gerald T. Healy III & Jing Ru Tan & Peter F. Orazem, 2020. "Measuring Market Power in Professional Baseball, Basketball, Football, and Hockey," The American Economist, Sage Publications, vol. 65(2), pages 214-231, October.
    • Handle: RePEc:sae:amerec:v:65:y:2020:i:2:p:214-231
    DOI: 10.1177/0569434520941505
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0569434520941505
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0569434520941505?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:bla:scotjp:v:47:y:2000:i:4:p:364-98 is not listed on IDEAS
    2. Donald L. Alexander, 2001. "Major League Baseball," Journal of Sports Economics, , vol. 2(4), pages 341-355, November.
    3. Boland, Lawrence A, 1981. "On the Futility of Criticizing the Neoclassical Maximization Hypothesis," American Economic Review, American Economic Association, vol. 71(5), pages 1031-1036, December.
    4. Nicolas Scelles & Boris Helleu & Christophe Durand & Liliane Bonnal, 2013. "Determinants of Professional Sports Firm Values in the United States and Europe: A Comparison Between Sports Over the Period 2004-2011," International Journal of Sport Finance, Fitness Information Technology, vol. 8(4), pages 290-293, November.
    5. John Vrooman, 2009. "Theory of the Perfect Game: Competitive Balance in Monopoly Sports Leagues," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(1), pages 5-44, February.
    6. David L. Darling & Stephan L. Tubene, 1996. "Determining the Population Threshold of Minor Trade Centers: A Benchmark Study of Non-Metropolitan Cities in Kansas," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 18(1), pages 95-101.
    7. Roger G. Noll, 2003. "The Organization of Sports Leagues," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(4), pages 530-551, Winter.
    8. John Vrooman, 2000. "The Economics of American Sports Leagues," Scottish Journal of Political Economy, Scottish Economic Society, vol. 47(4), pages 364-398, September.
    9. XiaoGang Che & Brad Humphreys, 2015. "Competition Between Sports Leagues: Theory and Evidence on Rival League Formation in North America," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(2), pages 127-143, March.
    10. Nicolas Scelles & Boris Helleu & Christophe Durand & Liliane Bonnal, 2016. "Professional Sports Firm Values," Journal of Sports Economics, , vol. 17(7), pages 688-715, October.
    11. Nicolas Scelles & Boris Helleu & Christophe Durand & Liliane Bonnal, 2016. "Professional Sports Firm Values: Bringing New Determinants to the Foreground? A Study of European Soccer, 2005-2013," Post-Print hal-01987929, HAL.
    12. John J. Gruidl & Dimitri Andrianacos, 1994. "Determinants Of Rural Retail Trade: A Case Study Of Illinois," The Review of Regional Studies, Southern Regional Science Association, vol. 24(1), pages 103-118, Summer.
    13. Donald L. Alexander & William Kern, 2004. "The Economic Determinants of Professional Sports Franchise Values," Journal of Sports Economics, , vol. 5(1), pages 51-66, February.
    14. A. P. Lerner, 1934. "The Concept of Monopoly and the Measurement of Monopoly Power," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 1(3), pages 157-175.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tyler Horn & Levi Soborowicz & Rashad Dixon & Peter F. Orazem, 2024. "Are NBA Players Equally Valued by Team Owners and Trading Card Collectors?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 52(2), pages 103-116, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zelenkov, Yu. & Solntsev, I., 2022. "Predicting the value of professional sport clubs. A study of European soccer, 2005-2018," Journal of the New Economic Association, New Economic Association, vol. 56(4), pages 28-46.
    2. Pelnar, Gregory, 2007. "Antitrust Analysis of Sports Leagues," MPRA Paper 5382, University Library of Munich, Germany.
    3. Antoine Feuillet & Nicolas Scelles & Christophe Durand, 2017. "A winner’s curse in the bidding process for broadcasting rights in football? The cases of the French and UK markets," Post-Print hal-01935541, HAL.
    4. Nicolas Scelles & Boris Helleu & Christophe Durand & Liliane Bonnal & Stephen Morrow, 2017. "Explaining the Number of Social Media Fans for North American and European Professional Sports Clubs with Determinants of Their Financial Value," Post-Print halshs-02110645, HAL.
    5. Nicolas Scelles & Boris Helleu & Christophe Durand & Liliane Bonnal & Stephen Morrow, 2017. "Explaining the Number of Social Media Fans for North American and European Professional Sports Clubs with Determinants of Their Financial Value," IJFS, MDPI, vol. 5(4), pages 1-19, November.
    6. Nicolas Scelles & Boris Helleu & Christophe Durand & Liliane Bonnal, 2013. "Determinants of Professional Sports Firm Values in the United States and Europe: A Comparison Between Sports Over the Period 2004-2011," International Journal of Sport Finance, Fitness Information Technology, vol. 8(4), pages 290-293, November.
    7. Geoffrey Propheter, 2017. "Subsidies and Stadia’ Opulence," Journal of Sports Economics, , vol. 18(1), pages 3-18, January.
    8. Chris Judde & Ross Booth & Robert Brooks, 2013. "Second Place Is First of the Losers," Journal of Sports Economics, , vol. 14(4), pages 411-439, August.
    9. Åse Jacobsen & Morten Kringstad & Tor-Eirik Olsen, 2021. "Extraordinary Funding and a Financially Viable Football Industry—Friends or Foes? A Norwegian Football League Perspective," Sustainability, MDPI, vol. 13(5), pages 1-19, March.
    10. Nicolas Scelles & Boris Helleu & Christophe Durand & Liliane Bonnal, 2016. "Professional Sports Firm Values," Journal of Sports Economics, , vol. 17(7), pages 688-715, October.
    11. Antoine Feuillet & Mickael Terrien & Nicolas Scelles & Christophe Durand, 2021. "Determinants of coopetition and contingency of strategic choices: the case of professional football clubs in France," Post-Print halshs-02974491, HAL.
    12. Mickaël Terrien & Loris Terrettaz & Yann Carin, 2023. "How Fear, Exogeneous Shocks and Leadership Impact Change: The Case of Economic Models of the French Men’s Professional Basketball Clubs," Sustainability, MDPI, vol. 15(6), pages 1-17, March.
    13. Maribel Serna Rodríguez & Andrés Ramírez Hassan & Alexander Coad, 2019. "Uncovering Value Drivers of High Performance Soccer Players," Journal of Sports Economics, , vol. 20(6), pages 819-849, August.
    14. John Vrooman, 2015. "Sportsman Leagues," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(1), pages 90-115, February.
    15. Matt Andrews, 2015. "Being Special: The Rise of Super Clubs in European Football," CID Working Papers 299, Center for International Development at Harvard University.
    16. Rodney Fort, 2015. "Managerial Objectives: A Retrospective on Utility Maximization in Pro Team Sports," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(1), pages 75-89, February.
    17. Nicolas Scelles & Qi Peng & Maurizio Valenti, 2021. "Do the Peculiar Economics of Professional Team Sports Apply to Esports? Sequential Snowballing Literature Reviews and Implications," Economies, MDPI, vol. 9(1), pages 1-18, March.
    18. Donna, Javier D. & Pereira, Pedro & Trindade, Andre & Yoshida, Renan C., 2020. "Direct-to-Consumer Sales by Manufacturers and Bargaining," MPRA Paper 105773, University Library of Munich, Germany.
    19. Manthos D. Delis & Sotirios Kokas & Steven Ongena, 2016. "Foreign Ownership and Market Power in Banking: Evidence from a World Sample," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(2-3), pages 449-483, March.
    20. Schnellenbach, Jan & Schubert, Christian, 2015. "Behavioral political economy: A survey," European Journal of Political Economy, Elsevier, vol. 40(PB), pages 395-417.

    More about this item

    Keywords

    market power; Lerner Index; revenue sharing; local markets; price-cost margin; antitrust;
    All these keywords.

    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:amerec:v:65:y:2020:i:2:p:214-231. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://journals.sagepub.com/home/aex .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.