Measuring Competitive Balance in Professional Team Sports Using the Herfindahl-Hirschman Index

Measuring Competitive Balance in Professional Team Sports Using the Herfindahl-Hirschman Index Competitive balance in sports leagues is essentially concerned with inequality in match and championship outcomes. Measures of inequality or concentration from the income distribution and industrial organization literatures have, therefore, often been used to measure competitive balance. This paper focuses on the use of the Herfindahl-Hirschman Index (HHI) applied to wins. It is shown that variation in the number of teams in the league affects not only the lower bound but also the upper bound of the HHI. An expression is derived for the upper bound and a normalized measure of the HHI, applicable to wins, is proposed. The differences this can make in practice when tracking variations in competitive balance over time are illustrated by considering Depken’s (1999) application of the HHI to Major League Baseball. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Measuring Competitive Balance in Professional Team Sports Using the Herfindahl-Hirschman Index

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Publisher
Springer US
Copyright
Copyright © 2008 by Springer Science+Business Media, LLC.
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-008-9157-0
Publisher site
See Article on Publisher Site

Abstract

Competitive balance in sports leagues is essentially concerned with inequality in match and championship outcomes. Measures of inequality or concentration from the income distribution and industrial organization literatures have, therefore, often been used to measure competitive balance. This paper focuses on the use of the Herfindahl-Hirschman Index (HHI) applied to wins. It is shown that variation in the number of teams in the league affects not only the lower bound but also the upper bound of the HHI. An expression is derived for the upper bound and a normalized measure of the HHI, applicable to wins, is proposed. The differences this can make in practice when tracking variations in competitive balance over time are illustrated by considering Depken’s (1999) application of the HHI to Major League Baseball.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Feb 22, 2008

References

  • Demand for sport
    Borland, J.; MacDonald, R.
  • Free-agency and the competitiveness of Major League Baseball
    Depken, C.A.

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