Financial Incentives and League Policy: The Example of Major League Baseball's Steroid Policy

Abstract

This paper illustrates possible changes in revenue from league drug policies. We argue that there were perceived financial incentives for Major League Baseball (MLB) to not have a steroid policy. MLB did not begin testing players for steroids in earnest until the 2005 season although the league office acknowledged use a decade and a half earlier. Only after outside pressure did the league implement a policy with specific, enforceable penalties. This paper uses regression analysis to assess whether the absence of a true steroid policy prior to 2005 affected scoring, then quantifies the amount of revenue baseball owners lost as a consequence of the updated steroid policy.

Acknowledgements

The authors wish to thank without implicating Charles Brown, Bill Gerrard, and Richard Wolfe for helpful suggestions.