Skip to main content

Free-Agency and the Competitiveness of Major League Baseball

Review of Industrial Organization volume 14, pages 205–217 (1999)Cite this article

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.

This is a preview of subscription content, access via your institution.

Access options

Buy single article

Instant access to the full article PDF.

USD 39.95

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

References

  • Borenstein, Severin (1989) 'Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry', Rand Journal of Economics, 20, 344-365.

    Google Scholar 

  • Cassing, James and Richard W. Douglas (1980) 'Implications of the Auction Mechanism in Baseball's Free Agent Draft', Southern Economic Journal, 47, 110-121.

    Google Scholar 

  • Cymrot, Donald J. (1983) 'Migration Trends and Earnings of Free Agents in Major League Baseball, 1976-1979', Economic Inquiry, 21, 545-556.

    Google Scholar 

  • Daly, George and William J. Moore (1981) 'Externalities, Property Rights and the Allocation of Resources in Major League Baseball', Economic Inquiry, 19, 77-95.

    Google Scholar 

  • Domazlicky, Bruce R. and Peter M. Kerr (1990) 'Baseball Attendance and the Designated Hitter', The American Economist, 34, 62-68.

    Google Scholar 

  • Drahozal, Christopher R. (1986) 'The Impact of Free Agency on the Distribution of Playing Talent in Major League Baseball', Journal of Economics and Business, 38, 113-121.

    Google Scholar 

  • Durbin, James (1960) 'Estimation of Parameters in Time-Series Regression Models', Journal of the Royal Statistical Society, Series B, 22, 139-153.

    Google Scholar 

  • Dworkin, James B. (1981) Owners versus Players: Baseball and Collective Bargaining. Boston, Mass.: Auburn House.

    Google Scholar 

  • Evans, William N. and Ioannis N. Kessides (1993) 'Localized Market Power in the U.S. Airline Industry', Review of Economics and Statistics, 75, 66-75.

    Google Scholar 

  • Fort, Rodney and James Quirk (1995) 'Cross-Subsidization, Incentives, and Outcomes in Professional Team Sports Leagues', Journal of Economic Literature, 33, 1265-1299.

    Google Scholar 

  • Geroski, Paul A. (1981) 'Specification and Testing the Profits-Concentration Relationship: Some Experiments for the United Kingdom', Economica, 48, 279-288.

    Google Scholar 

  • Gilbert, R. Alton (1984) 'Bank Market Structure and Competition: A Survey', Journal of Money, Credit and Banking, 16, 617-645.

    Google Scholar 

  • Hausman, Jerry A. (1978) 'Specification Tests in Econometrics', Econometrica, 46, 1251-1271.

    Google Scholar 

  • Hylan, Timothy, Maureen J. Lage, and Michael Treglia (1996) 'The Coase Theorem, Free Agency and Major League Baseball: A Panel Study of Pitcher Mobility from 1961 to 1992', Southern Economic Journal, 27, 1029-1042.

    Google Scholar 

  • Kamerschen, David R. and Nelson Lam (1975) 'A Survey of Measures of Market Power', Rivista Internazionale di Scienze Economiche e Commerciali, 22, 1131-1156.

    Google Scholar 

  • Lehn, Kenneth (1984) 'Information Asymmetries in Baseball's Free Agent Market', Economic Inquiry, 22, 37-44.

    Google Scholar 

  • MacDonald, James M. (1987) 'Competition and Rail Rates for the Shipment of Corn, Soybeans, and Wheat', The Rand Journal of Economics, 18, 151-163.

    Google Scholar 

  • Marvel, Howard P. (1978) 'Competition and Price Levels in the Retail Gasoline Market', Review of Economics and Statistics, 60, 252-258.

    Google Scholar 

  • Quirk, James and Rodney Fort (1992) Pay Dirt: The Business of Professional Team Sports. Princeton, New Jersey: Princeton University Press.

    Google Scholar 

  • Scully, Gerald (1989) The Business of Major League Baseball. Chicago, Ill: The University of Chicago Press.

    Google Scholar 

  • Sullivan, Daniel (1985) 'Testing Hypotheses about Firm Behavior in the Cigarette Industry', Journal of Political Economy, 93, 586-598.

    Google Scholar 

  • Sumner, Daniel A. (1981) 'Measurement of Monopoly Behavior: An Application to the Cigarette Industry', The Journal of Political Economy, 89, 1010-1019.

    Google Scholar 

  • Thorn, John and Peter Palmer (1994) Total Baseball 1993. Portland, Oregon: Creative Multimedia.

    Google Scholar 

  • White, Halbert (1980) 'A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity', Econometrica, 48, 817-838.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. The University of TX at Arlington, Department of Economics, Arlington, TX, 76019-0479, U.S.A

    Craig A. Depken II

Authors
  1. Craig A. Depken II
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Depken, C.A. Free-Agency and the Competitiveness of Major League Baseball. Review of Industrial Organization 14, 205–217 (1999). https://doi.org/10.1023/A:1007788303098

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/A:1007788303098

Keywords

  • Standard Deviation
  • Structural Change
  • Industrial Organization
  • Structural Effect
  • Sensitive Measure