Property Right Regimes in Japanese Baseball: A New Look at the Rottenberg Invariance Proposition

We examine the 1965 change from an open-bidding to a draft system for new players in Japan's professional baseball leagues. Our theoretical analysis, which incorporates two factors commonly observed in professional sports, imperfect information on new recruits and outlier, highly skilled players, calls into question the magnitude of the changes that would be expected upon changing the rule structure for recruiting new players. Our empirical finds results that are strikingly similar to results from U.S. data. One baseball league in each country (the Central in Japan, the American in U.S.) possessed a dominant team (the Giants in Japan, the Yankees in the U.S.) under the open-bidding system, while the other league (the Pacific in Japan, the National in the U.S.) had substantially more equality. After the 1965 rule change in both countries, the leagues previously with a dominant team become substantially more competitive. In the other more competitive league, there is less change. The similarity of the effects generated across cultures and countries from the rule changes shows the important of the structure of property rights in any competitive framework.