Review of Industrial Organization (2005) 27:47–71 © Springer 2005
Production Efﬁciency and Discriminatory Hiring
Practices in the National Hockey League: A
Stochastic Frontier Approach
LEO H. KAHANE
Department of Economics, Mount Holyoke College, and California State University, East
Bay, 50, College Street, South Hadley, MA01075, U.S.A
Abstract. This paper studies the production process in the National Hockey League
(NHL) and attempts to identify the sources of production inefﬁciency, including poten-
tial inefﬁciencies associated with preferences for, or against French-Canadians. Employing
the method of stochastic frontier estimation, it is shown that production inefﬁciencies are
prevalent in the NHL and can, in part, be traced to differences in coaching ability, team
ownership, local sports competition, and management experience. In addition, it is found
that teams with unusually high (or low) numbers of French-Canadian players tended to
be less efﬁcient, implying that discriminating hiring practices are costly.
Key words: Discrimination, efﬁciency, National Hockey League, production stochastic
JEL Classiﬁcations: D21, J71, L83.
Efﬁciently combining inputs to yield output is the primary task of ﬁrm
management. When two ﬁrms in an industry use the same inputs and
employ the same technology, yet produce different quantities of output, the
implication is that at least one ﬁrm is producing inefﬁciently.
Professional sports are subject to this same sort of production inefﬁ-
ciency. Teams employing the same (or similar) sets of playing inputs rou-
tinely witness differing success at producing wins in league competition.
Indeed, pro sports are replete with examples of teams that both under- and
over-achieved, given the skill inputs of their players as proxied by team
For example, in Major League Baseball (MLB) during the 2001 sea-
son the Texas Rangers spent $88.5 million on player payroll and witnessed
a record of 73 wins and 89 losses, whereas the Oakland Athletics spent