Convergence and clustering in major league baseball: the haves and have nots?

Abstract

There appear to be two distinct views on the level of competitive balance within Major League Baseball. One view, mostly associated with academics, is that competition is more equal today than it ever has been. The other view, mostly associated with the media and the industry, is that competition is far worse today. The present paper, borrowing from the literature on economic convergence, finds that both views are valid. More specifically, while competitive balance has continued to improve, the improvement has been such as to create distinct convergence clusters. A discussion of the composition of these clusters is offered in the text.

Notes

This point has been made in the work of Rottenberg (1956), Neale (1964), and El-Hodiri and Quirk (1971).

For example within the American League, the New York Yankees won four World Series titles and in the National League, the Atlanta Braves won nine Division titles.

The Commissioner's Blue Ribbon Panel on Baseball Economics was convened by MLB to investigate the issues of competitive balance and economic health. Specifically, the panel's stated purpose was to ‘examine the question of whether Baseball's current economic system has created a problem of competitive imbalance in the game’ (Levin et al., 2000, p. 59).

It is the case, that the BRP completely sidesteps the unavoidable question of what MLB teams maximize. It is possible, perhaps likely, that these teams maximize profits rather than wins. However, even in this case, competitive balance is important as attendance and, therefore, revenues are sensitive to competitive balance (Schmidt and Berri, 2001).

Quirk and Fort (1992) also measured competitive balance by comparing the standard deviation of each season to an idealized standard deviation which would exist if the league had maximized competitive balance.

In several previous studies it was found that the time series data are stationary around a deterministic trend and therefore suggest a degree of convergence. An example in macroeconomics concerns divergences between real output for pairs of countries (see Hobijn and Franses, 2000) or pairs of regions within the USA (see Carlino and Mills, 1993; Loewy and Papell, 1995 and Tomljanovich and Vogelsang, 2001). Other examples can be found in disciplines such as tourism and marketing, where tourist arrivals and sales often display upward trending patterns. Finally, environmental data like temperatures may also display trends, and if these are upward moving this can be taken as evidence of global warming (see Bloomfield, 1992; Woodward and Gray, 1993; Zheng and Basher, 1999 and Fomby and Vogelsang, 2000).

In contrast to other tests of stationarity, the KPSS’ tests have as their null (H₀) that the series is I(0).

The Gauss program to run the Hobijn and Franses algorithm is available from Bart Hobijn's homepage, [http://www.newyorkfed.org/rmaghome/economist/hobijn/data.html].

MLB has expanded six times from the original 16 teams. In 1961, 1962, 1977, 1993 and 1998, the league expanded by two teams, while four teams were added in 1969.

For a representative sample of this literature see Scully (1974), Medoff (1976) and Zimbalist (1992).

The data ultilized to construct these averages was taken from the web site of the United States Census Bureau [http://www.census.gov]. The population of the cities that housed multiple teams was divided equally between the resident organizations. For example, the population of Philadelphia in 1910 was 1 549 008. Given that both the A's and Phillies played in Philadelphia for that season, the population total used for these cities was half this number, or 774 504.

The data in Table 5 begins with the 1903 season. Although the American League began operations in 1901, for the 1901 season the St. Louis Browns were located in Milwaukee while the New York Yankees played in Baltimore. For the 1902 season, the Milwaukee franchise moved to St. Louis. After this season, the Baltimore franchise was moved to New York. Major League Baseball saw no movement of franchises until the Boston Braves moved to Milwaukee following the 1952 campaign.