Free-Agency and the Competitiveness of Major League Baseball

Free-Agency and the Competitiveness of Major League Baseball I investigate whether the removal of the reserve clause in professional baseball affected the competitive nature of the industry in the context of whether the distribution of team wins has been affected by free-agency. Unlike previous studies which use the standard deviation of winning percentage, I use a more sensitive measure of parity. I calculate the deviations of the Herfindahl-Hirschman Index of team wins from the competitive ideal during 1920 to 1996 and relate them to player-talent distribution and structural changes in the industry. I isolate the structural effect of free-agency and find that it has adversely affected the parity of the American League but that it has had no statistical influence on the parity of the National League. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Free-Agency and the Competitiveness of Major League Baseball

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1999 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1007788303098
Publisher site
See Article on Publisher Site

Abstract

I investigate whether the removal of the reserve clause in professional baseball affected the competitive nature of the industry in the context of whether the distribution of team wins has been affected by free-agency. Unlike previous studies which use the standard deviation of winning percentage, I use a more sensitive measure of parity. I calculate the deviations of the Herfindahl-Hirschman Index of team wins from the competitive ideal during 1920 to 1996 and relate them to player-talent distribution and structural changes in the industry. I isolate the structural effect of free-agency and find that it has adversely affected the parity of the American League but that it has had no statistical influence on the parity of the National League.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 15, 2004

References

  • Migration Trends and Earnings of Free Agents in Major League Baseball, 1976-1979
    Cymrot, D. J.
  • Externalities, Property Rights and the Allocation of Resources in Major League Baseball
    Daly, G.; Moore, W. J.

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