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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.
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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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