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A Test of the Optimal Positive Production Network Externality in Major League Baseball

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  • Daniel, Rascher

Abstract

Unlike most businesses, firms in a sports league need viable competitors. While a certain amount of domination is optimal, from an individual owners perspective, too much will result in league dissolution, and thus a lower utility for every owner. Hence, there is a limited positive production network externality. This paper examines the optimal level of the externality in professional baseball using data from each game of the 1996 MLB season. Both absolute and relative quality are important determinants of the demand for sports contests. In fact, fans prefer a game in which two high quality teams are competing, but the home team has approximately twice as good of a chance as the visiting team of winning.

Suggested Citation

  • Daniel, Rascher, 1999. "A Test of the Optimal Positive Production Network Externality in Major League Baseball," MPRA Paper 25832, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:25832
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    File URL: https://mpra.ub.uni-muenchen.de/25832/1/MPRA_paper_25832.pdf
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    References listed on IDEAS

    as
    1. Walter C. Neale, 1964. "The Peculiar Economics of Professional Sports," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 78(1), pages 1-14.
    2. Bruce R. Domazlicky & Peter M. Kerr, 1990. "Baseball Attendance and the Designated Hitter," The American Economist, Sage Publications, vol. 34(1), pages 62-68, March.
    3. Jennett, Nicholas I, 1984. "Attendances, Uncertainty of Outcome and Policy in Scottish League Football," Scottish Journal of Political Economy, Scottish Economic Society, vol. 31(2), pages 176-198, June.
    4. Glenn Knowles & Keith Sherony & Mike Haupert, 1992. "The Demand for Major League Baseball: A Test of the Uncertainty of Outcome Hypothesis," The American Economist, Sage Publications, vol. 36(2), pages 72-80, October.
    5. Rodney Fort & James Quirk, 1995. "Cross-subsidization, Incentives, and Outcomes in Professional Team Sports Leagues," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1265-1299, September.
    6. Peel, David A & Thomas, Dennis A, 1988. "Outcome Uncertainty and the Demand for Football: An Analysis of Match Attendances in the English Football League," Scottish Journal of Political Economy, Scottish Economic Society, vol. 35(3), pages 242-249, August.
    7. Peter J. Sloane, 2000. "The Regulation of Professional Team Sports," IASE Conference Papers 0003, International Association of Sports Economists.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    uncertainty of outcome; censored regression; cluster correlation; demand; baseball; network externality;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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