Graduation Year

Fall 2010

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Nzinga Broussard

Reader 2

Yosef Bonaparte

Abstract

This paper looks at the impact that competitive balance has on team revenues. The hypothesis that this paper is operating under is that higher levels of competitive balance will lead to higher levels of revenue. Two different measures of competitive balance will be used and regressions will be run to investigate whether high levels of the competitive balance measure are associated with high levels of revenue. The results of the data indicated that over all three time horizons (ten year, five year, and two year), high levels of variability in playoff appearances were associated with high revenue for Major League Baseball (MLB) teams. The results also indicate that over a two year time span, high standard deviation in winning percentage were associated with higher revenue in both MLB and the National Football League (NFL) and also that high standard deviation of winning percentage over a ten year period were associated with lower revenues in the NFL. The data provides consistent support for the hypothesis of a positive relationship between competitive balance and revenue in MLB and inconsistent support in the NFL. This inconsistent relationship in the NFL is hypothesized to be due to differences in time horizons. Over the short term, fans like to see high variability in winning percentage because it gives them faith that their team will be good the next season. In the long term however, fans do not like a lot of variability in their team and would rather see a consistent winner.

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