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The Economics of Baseball Contraction

Journal of Sports Economics , Volume 4 (4): 367 – Nov 1, 2003

Details

Publisher
Sage Publications
Copyright
Copyright © 2003 by SAGE Publications
ISSN
1527-0025
eISSN
1527-0025
D.O.I.
10.1177/1527002503257543
Publisher site
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The Economics of Baseball Contraction

Abstract

In the fall of 2001, Commissioner Bud Selig announced that two teams would be eliminated from Major League Baseball. After ensuing litigation and collective bargaining, contraction has been postponed until 2007 but remains a possibility. This article examines the economics of contraction of teams in a sports league, first developing the basic welfare economics of expansion and contraction and then investigating whether the private incentives of existing teams lead to inefficient contraction decisions. The core finding is that, using financial information from the 2001 season, all teams in Major League Baseball probably generate positive net social benefits, but the existing teams will benefit by approximately $1 billion from the elimination of the two weakest teams.
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