Review of Industrial Organization 21: 41–54, 2002.
© 2002 Kluwer Academic Publishers. Printed in the Netherlands.
Competitive Balance and Market Size in Major
League Baseball: A Response to Baseball’s Blue
MARTIN B. SCHMIDT
P.O. Box 751, Department of Economics, Portland State University, Portland, OR 97207-0751,
DAVID J. BERRI
Department of Economics, California State University – Bakersﬁeld, 9001 Stockdale Highway,
Bakersﬁeld, CA 93311, U.S.A.
Abstract. Major League Baseball’s recently convened Blue Ribbon Panel concluded that compet-
itive balance had been reduced in the latter half of the 1990s. Speciﬁcally, the Blue Ribbon Panel
argues that smaller-market teams now know before the season begins that there is little chance for
post-season success. Such a ﬁnding is contrary to the ﬁndings of numerous economists who contend
that Major League Baseball at the close of the twentieth century has never been more competitively
balanced. The purpose of this work is to reconcile these disparate viewpoints via an analysis of the
link between various deﬁnitions of market size and competitive balance. In general, our analysis of
the 1990s reveals that market size, however it is deﬁned, is not consistently related to the level of
competitive balance in Major League Baseball.
Key words: Competition, Gini coefﬁcient, major league baseball, market size.
Economists have historically advocated the social beneﬁts of competition while
noting the desire of individual ﬁrms to promote competitive imbalance. In gen-
eral, ﬁrms beneﬁt from the elimination of competition. One exception may be the
professional sports industry. As noted by Neale (1964) and El-Hodiri and Quirk
(1974), the elimination of competition in professional sports effectively eliminates
the industry. Consequently, professional sports leagues strive to enact institutions
to promote competitive balance or, at the very least, the illusion of competitive
For example, the National Football League, and most professional leagues, have instituted
reverse order drafts, so that weaker teams select ﬁrst. Theoretically, this gives weaker teams ﬁrst
opportunity at the better rookies and may increases the likelihood of becoming competitive. The