rule changes and competitive balance in japanese professional baseball i introduction since rottenberg s 1956 classic analysis of baseball s reserve clause economists have been interested in whether the rules for initially allocating players among major league baseball mlb teams affect their final allocation el hodiri and quirk 1971 formalized rottenberg s analysis of player allocation rules for a sports league in which each team independently maximizes its profits within the league s institutional constraints 1 consider the effect of a player draft regime and an open bidding regime on the allocation of new players often called rookies if a player draft allows team a to claim initially a particular new player and that player would generate a higher marginal product with team b then the two teams have incentives to make an exchange and send the player to team b alternatively under an open bidding regime the new player signs with the team presenting the highest offer i e team b with which he generates the highest marginal product assuming that transaction costs of exchanging players are zero el hodiri and quirk showed that the final allocation of players across teams will be the same in both regimes this result that the final allocation of players does not depend on the rules governing the initial allocation of players is baseball s version of the coase theorem following coase s 1960 analysis this invariance result vanishes if there are obstacles to exchanging players after the initial allocation in an open bidding regime players are initially allocated to the team with which they have the highest marginal product thereby eliminating the need for player exchanges since the best players are likely to generate the highest marginal product with teams in cities that have a high demand for winning games in an open bidding regime these teams are likely to have higher winning percentages and win more championships than other teams 2 by contrast in a draft regime the best players are often initially allocated to a team located in a city with a low demand for winning games if there are obstacles to player exchange then players will be allocated more evenly across teams under a draft regime and competitive balance should improve both within a given season and over time 3 empirical studies have used performance data from north american mlb to analyze whether changes in the rules for allocating rookies among teams affect competitive balance fort and quirk s 1995 recent study found that mlb s change in 1965 from an open bidding to a draft regime for allocating new players increased competitive balance in the american league and had little effect on competitive balance in the national league the power of statistical tests conducted with the mlb data is however severely limited due to the small number of observations from the draft regime period this article uses a larger data set from japanese baseball to examine the same rule change that economists have analyzed for mlb remarkable as it may seem the japanese professional baseball league jpbl adopted the same rule change from an open bidding to a draft regime for rookies in the same year 1965 as major league baseball our goal is to examine how the rule change in the jpbl affected competitive balance in its two leagues and to compare the outcomes of these two remarkably similar experiments set in two very different cultures ii studies of north american mlb and japanese jpbl daly and moore 1981 compared player allocation in the two regimes for allocating rookies by examining mlb s 1965 switch from an open bidding to a draft regime they used pre and post 1965 performance data from the american and national leagues to examine several measures of competitive balance in the post 1965 draft regime they found substantially more competitive balance in the american league and somewhat more competitive balance in the national league using different tests for competitive balance fort and quirk 1995 1 282 86 also found evidence for more competitive balance in the american league but found no change in competitive balance in the national league

quick job entry or long term human capital development the dynamic effects of alternative training schemes this study evaluates and compares the eectiveness of two alternative training schemes for the unemployed short job search oriented training and long human capital oriented training we investigate the impact dynamics of these pro grams considering both unemployment and employment duration our analysis uses a rich administrative longitudinal data set for germany where both programs were implemented at the same time our estimation strategy flexibly accounts for dy namic selection on observables and unobservables as well as heterogeneous treatment eects the results indicate that short term training schemes can be an eective tool to reduce unemployment in the long run in particular if participation occurs early during unemployment long term training schemes increase the average du ration of employment spells more strongly than short term training however they increase the expected unemployment duration if they are started early during un employment this negative short run impact of long term training is an important driver of its overall eectiveness

the nba and the influx of international basketball players the determinants of salaries for professional athletes in the national basketball association nba are examined to investigate how international athletes have fared relative to athletes trained in the united states it is found that international basketball players were paid a large premium above other players of similar skills and characteristics for the 1996 97 and 1997 98 seasons after which the premium disappeared this temporary premium is likely attributable to a winner s curse experienced by nba teams before investing significant resources in scouting and evaluating international players

location and attendance in major league baseball this study uses a travel cost model to analyse the attendance impacts on major league baseball mlb of the closest substitute mlb team it is found that the closer two teams are the lower attendance is at each team relative to two teams that are farther apart in addition when a new team moves into the area of an existing team there is an additional initial reduction in attendance for the incumbent team this has implications for actions aimed at changing the number of teams in mlb either by contraction or by possible antitrust approaches that would increase the number of teams especially in megalopolis markets further and consistent with past demand studies pricing is in the inelastic portion of gate demand and fan loyalty is a significant contributor to the estimation of gate attendance

migration trends and earnings of free agents in major league baseball 1976 1979 this paper is an empirical investigation of the effect of team characteristics on the migration pattern of free agents in major league baseball during the period 1976 1979 the results indicate that high quality free agents tend to leave winning teams and move to teams in cities with large or rapidly growing populations the compensation paid to free agents is shown to depend on these team characteristics as well as the players personal characteristics and market conditions

externalities property rights and the allocation of resources in major league baseball most economists who have analyzed professional baseball have concluded that two distinctive features of its labor market the reserve clause and player draft influence the distribution of wealth between players and owners but do not affect the allocation of playing talent among teams such conclusions which are strongly at variance with laymen s views of such matters are derived from theoretical considerations rather than empirical examinations our paper examines data from the two decades of major league history and concludes that on the basis of that data the empirical generalizations of previous economists do not appear to be justified

structural change competitive balance and the rest of the major leagues i introduction competitive balance is the object of significant attention in the analysis of pro sports leagues under rottenberg s 1956 uncertainty of outcome hypothesis enough imbalance may actually drive down the demand for pro sports and league revenues with it but the analysis of competitive balance itself also is insightful for the impact of league self regulation choices in this paper we extend recent approaches in time series analysis found in schmidt 2001 schmidt and berri 2001a 2001b 2003 2004 lee and fort 2005 henceforth lf and fort and lee 2006 beyond its exclusive focus on major league baseball mlb to the national basketball association nba the national football league nfl and the national hockey league nhl we restrict ourselves only to north american leagues henceforth nals although davies downward and jackson 1995 simmons 1996 and dobson and goddard 1998 provide interesting time series analysis in world leagues as well these works add dramatically to the understanding of structural impacts found from ad hoc cross section approaches the review is in lf in nals a number of structural changes have been hypothesized to dramatically alter competitive balance among teams over time first there are the familiar macro occurrences of depression and war and exogenous league factors like the fundamental alteration in local revenue brought on by increases in the value of local tv broadcast rights beginning in the late 1970s second there are more direct league circumstances changes in the rules of the games the draft the end of the reserve clause changes in the number of teams merger and expansion and their locations salary caps and labor issues lf also examined the impact of racial integration on competitive balance but for the rest of the nals there is no clearly defined point marking their racial integration finally schmidt and berri 2003 and eschker perez and siegler 2004 have begun to investigate the impacts of the influx of foreign born players we apply break point detection techniques described at length in lf to within season competitive balance measures in the rest of the nals there are a number of interesting insights all breaks detected for these other nals occur after 1966 and not until 1970 in the nba rule changes in the nfl in the late 1970s correspond with a break point in that league but generally rule changes do not correspond to any break points the imposition in nals of the draft and free agency conform to rottenberg s invariance proposition ip except for a general negative trend in competitive balance in the nba when they do correspond with break points league expansion and team relocation have predictable impacts but some of these alterations do not have corresponding break points mergers in all three of the other nals correspond in interesting ways with break points that enhance competitive balance but not all mergers correspond with break points there is no correspondence between the break points and the imposition of the salary caps in the nba and the nfl finally we can find no correspondence between break points and any labor issues in any of these leagues except for enhanced balance that followed after the 1998 nba lockout explanations for the negative trend in nba are consistent with the idea that there is a short supply of tall people that is a truly physical limit on talent inputs in the nba originally proposed by berri et al 2005 and an explanation for the second break point in the nhl may have to do with the influx of european players the paper proceeds as follows in section ii we specify the empirical approach and handle the important details of stationary series and detrending the results are shown and discussed within the context of the limits of the break point technique in section iii conclusions round out the paper in section iv ii

the law of genius and home runs refuted i introduction empirical regularities in biology as in other fields can be extremely interesting in particular such regularities may suggest the operation of fundamental laws unfortunately apparent regularities sometimes cannot stand up under close scrutiny solow costello and ward 2003 a lively provocative article by devany 2007 in economic inquiry argues that the statistical law of home run hitting is the same as the laws of human accomplishment developed by lotka pareto price and murray there is no evidence that steroid use has altered home run hitting the greatest accomplishments in science art and music all follow the same universal law of genius and the stable paretian model developed here will be of use to economists studying extreme accomplishments in other areas which apparently follows from his claim that the size distribution of annual home run production has a finite mean but infinite variance and follows a power law distribution devany s argument is not unique it is part of a large and growing literature where claims of the ubiquity of power laws are legion 1 devany takes the additional step of connecting this statistical analysis to an argument about the effect of steroids on home run hitting by major league ballplayers steroid advocates have to argue that the new records are not consistent with the law of home runs and that the law itself has changed as a result of steroid use our purpose of this article is to suggest that the above should be met with a fair amount of skepticism first we try to provide some background on previous attempts to identify the existence of universal laws and provide the intellectual context for devany s claims second we show that devany s claims follow from a flawed statistical inference procedure his procedure with probability l would find evidence consistent with infinite variance for virtually any nontrivial data set to do so we first analyze the size distribution of a quantity which could not follow a power law distribution and show that using devany s inference procedure we would be led to the same incorrect claim we also discuss the important distinction elided by devany and others writing in related literatures between an unconditional distribution and a conditional distribution third we observe that the size distribution of home runs cannot follow a power law distribution and show that the posited class of distributions provide an inadequate approximation to the data at best fourth while concurring with devany s implicit criticism that steroid advocates who rely on recent trends to substantiate their views have not made their case we suggest that the problem is that the question is ill posed the level and distribution of total home runs in any given year is minimally a function of hundreds of things the quality of pitching the weather the introduction of new ball parks the number of games played the distribution of baseball talent across the teams and so forth to claim that only one cause is responsible for a trend involves some possibly unstated assumption about the myriad of other factors indeed what is sauce for the goose is sauce for the gander those seeking to support or deny the claim that increased use of steroids have led to increased home run hitting will have to employ considerably more shoe leather than mere statistical analysis of the unconditional distribution of home runs per player or time trends in home run hitting we conclude by observing that neither examination of time trends in annual home run production nor examination of the unconditional distribution of home runs will settle the dispute between steroid advocates and steroid opponents and that more convincing evidence will have to be sought elsewhere ii

structural change in mlb competitive balance the depression team location and integration no detectable break points in within season competitive balance 1901 99 occur after 1937 in the national league or after 1962 in the american league despite expansion free agency and the growth of local tv revenue disparity since then instead a continual improvement in competitive balance has occurred since those years associated with break points prior to these years 1 the al emerged from the depression much more unbalanced than the nl 2 team movement and league expansion alter balance in well known ways and 3 discriminatory preferences were stronger in larger revenue markets than in smaller revenue markets in both leagues jel c32 l83

optimal competitive balance in a season ticket league there is no question the level of play has decreased now do games become more exciting are teams more evenly matched no question is that good for the game or not i don t know i really don t know i ask that question all the time nfl hall of fame quarterback troy aikman quoted in pedulla 2003 i think that margin of competition that margin of the difference between winning and losing in this league is very small and i think that is great for the fans because every team comes in with an opportunity to win nfl commissioner roger goodell quoted in curran 2008 i introduction in this article we lay out the basic welfare foundation of optimal competitive balance for regular season play in a closed sports league where season tickets dominate sales this setting best describes the national football league nfl economically the most important of the four major north american leagues nals we handle the case of single ticket leagues like baseball in fort and quirk 2010 our chosen focus is on balance during the regular season and details of all our modeling choices are given in the next section the quotes given above help to illuminate the policy issue addressed by the theory is the nfl too balanced as hall of fame quarterback troy aikman s quote suggests or is the level of parity on the field somehow optimal as suggested in commissioner goodell s quote congressional hearings u s senate 2001 have even been convened on the subject in the remaining nals for the policy oriented literature it is implicitly taken that more balance would be an improvement over the result generated by the leagues themselves comprehensive reviews are in fort 2006a fort and quirk 1995 szymanski 2003 this debate among fans reporters and economists lacks anything remotely resembling any competitive balance target for example an optimal level of competitive balance from the perspective of optimality constructs this intuitive belief that enhancing competitive balance would on net enhance general fan welfare may simply be pareto noncomparable advocacy rottenberg 1956 was the first to detail the problems associated with a lack of competitive balance if outcomes on the field court or ice become too predictable as when there are only a few very dominant teams fans of perennially unsuccessful teams may stay away in droves and some teams in the league may actually go under also even the teams that survive will have lower revenues if these disillusioned fans forsake the sport altogether thus leagues have a vested interest in managing the level of competitive balance the point of departure for this article is how the league s profit maximizing choice of competitive balance deviates from one specification of the social welfare maximizing level of balance we address the question of optimal competitive balance comparing decentralized league outcomes to the level of competitive balance that maximizes the sum of consumers and producers surpluses we realize that other possible pareto optimal outcomes might be developed but the surplus maximizing approach does have the virtue of utilizing theoretical tools that are conceptually amenable to relatively straightforward measurement and comparison in actual leagues in particular our main result is that whether the decentralized league result is too much or too little balance relative to the surplus maximizing level is an empirical matter if the marginal impacts of talent rearrangements are larger in smaller revenue markets than in larger revenue markets then welfare is enhanced by rearranging talent to create more balance but if the reverse is true then less balance enhances social welfare the elements required to actually assess this relationship namely available data and careful empirical analysis can settle the issue we also are not blind to the fact that some advocacy of particular mechanisms to enhance balance actually may be thinly veiled attempts to redistribute wealth from players to owners and among owners

managerial quality team success and individual player performance in major league baseball this paper uses 1969 87 major league baseball data to investigate the impact of managerial quality on team winning and individual player performance managerial quality and player performance are measured as predicted pay based on salary regressions these market based measures permit conclusions about costs and benefits of managerial quality there are two major findings first when player inputs are controlled for higher quality managers lead to higher winning percentages second players tend to play better relative to their prior performance levels the higher the manager s quality these findings suggest that as emphasized by the human resource management literature the quality of management makes an important difference in the performance of organizations

demand for sport this article reviews international literature on the demand for professional sport the first part presents a conceptual framework for understanding the sources and determinants of the demand for professional sporting contests the second part reviews empirical evidence on key determinants of attendance at sporting events and on other sources of demand such as broadcasting sponsorship and merchandising the review concludes that there is still much to be learned about demand for professional sport and that there are no simple lessons to be drawn from existing literature but important messages do emerge from studies of demand for attendance with regard to effects of uncertainty of outcome quality of contest and quality of viewing copyright 2003 oxford university press

winning in professional team sports historical moments our aims in this paper are to 1 examine the higher moments of the distribution of winning percentages and 2 discover economic implications of such an examination the results prove useful to both current sports league policy questions and future research we speculate that the institutional differences between north american pro leagues and european soccer leagues will prove fruitful areas for future research on the determination of competitive balance jel c1 l83 z20

what shapes player performance in soccer empirical findings from a panel analysis in this article we investigate the pay performance relationship of soccer players using individual data from eight seasons of the german soccer league bundesliga we find a nonlinear pay performance relationship indicating that salary does indeed affect individual performance the results further show that player performance is affected not only by absolute income level but also by relative income position an additional analysis of the performance impact of team effects provides evidence of a direct impact of team mate attributes on individual player performance

football spectator no show behaviour in the german bundesliga despite an extensive literature on stadium attendance demand our understanding of those factors shaping spectator no show behaviour is rudimentary at best here we explore such behaviour by using

ownership of property rights and the allocation of talents under the reserve clause system that assigns the property rights on the major league baseball players services to teams player transfers are negotiated between teams without the involvement of players in contrast under the current free agency system players with free agent status negotiate directly with potential suitors thus the system assigns the property rights to players using data extracted from the baseball archive http baseball1 com this article examines the effect of the change in the property rights assignment on the allocation of talents across teams we find that the change increased large market teams shares of veteran all star players and the concentration of senior players

the impact of the 1981 and 1994 1995 strikes on major league baseball attendance a time series analysis protracted labour disputes in professional team sports have become increasingly common in the past 30 years although each of the four major professional team sports in the usa have experienced episodes of labour strife major league baseball has the longest and most frequent experience with labour management conflict fans and the media claim with each incident permanent harm is done to baseball s standing as the national pastime the purpose of this paper is to ascertain whether such claims can be supported by the empirical evidence utilizing time series analysis aggregate attendance at professional baseball games is examined the evidence presented suggests that although the most protracted periods of labour discord had short term impacts on attendance there is no empirical evidence that these exogenous shocks had any long term effects

competitive balance measures in sports leagues the effects of variation in season length appropriate measurement of competitive balance is a cornerstone of the economic analysis of professional sports leagues we examine the distributional properties of the ratio of standard deviations rsd of points percentages the most widely used measure of competitive balance in the sports economics literature in comparison with other standarddeviation based measures simulation methods are used to evaluate the effects of changes in season length on the distributions of competitive balance measures for different distributions of the strengths of teams in a league the popular rsd measure performs as expected only in cases of perfect balance if there is imbalance in team strengths its distribution is very sensitive to changes in season length this has important implications for comparisons of competitive balance for different sports leagues with different numbers of teams and or games played jel l83 d63 c63

electoral campaign financing the role of public contributions and party ideology this article analyzes the effects of public financing of electoral campaigns on policies announced by ideologically oriented parties subject to pre electoral lobbying parties ideologies make politicians announce divergent platforms even though it means losing some votes divergent platforms in turn make lobbies actually contribute to parties electoral campaigns the announced platforms are biased in favor of the parties ideology and interest groups preferred policies finally increasing public financing of electoral campaigns may generate unequal electoral competition and may significantly raise the chances of one party becoming hegemonic wiping out party competition in the long run

balanced budget redistribution as the outcome of political competition this paper models balanced budget redistribution between socio economic groups as the outcome of electoral competition between two political parties equilibrium is unique in the present model and a sufficient condition for existence is given requiring that there be enough stochastic heterogeneity with respect to party preferences in the electorate the validity of hotelling s principle of minimum differentiation and of director s law are examined under alternative hypotheses concerning administrative costs of redistributions and voter s possibilities both of abstaining from voting and of becoming campaign activists for one of the parties the policy strategy of expected plurality maximization is contrasted with the strategy of maximizing the probability of gaining a plurality incomes are fixed and known so lump sum taxation is feasible however constraints on tax transfer differentiation between individuals are permitted in the analysis

the coase theorem free agency and major league baseball a panel study of pitcher mobility from 1961 to 1992 a great deal of conceptual and empirical work in the economic analysis of the law and property rights has been directed towards resolving a controversy surrounding the coase theorem many economists and legal scholars interpret the theorem as containing two propositions the first is that in the absence of transactions costs and wealth effects parties will bargain to an efficient outcome the second holds that the same outcome will be achieved regardless of the distribution of property rights the latter is known as the invariance thesis and it has been a source of dispute among scholars and between economic theorists and owners of economic enterprises e g owners of professional sports teams 5 11 16 23 24 25 26 28 29 this paper provides an econometric test of the invariance proposition major league baseball presents a natural experiment consisting of an industry in which there has been an explicit change in the assignment of property rights beginning in 1879 the reserve clause gave monopsony power to team owners a player could negotiate salary only with the team that owned his contract and the team could trade or sell the player as management saw fit in 1976 this system was replaced by the institution of free agency whereby a player with at least six years of major league experience acquired

the demand for rugby league evidence from causality tests during the last few years there has been an upsurge of interest in the determinants of the demand for professional team sports typically traditional demand estimation techniques are used to examine the determinants of attendance this paper attempts to show that the use of these techniques may be misleading existing studies implicitly or explicitly assume a direction of causality econometric estimation techniques are then applied to examine this direction of causality however no account is taken of possible spurious regression and time series properties of the data are not fully explored these omissions may have led to faulty policy recommendations in attempting to rectify traditional approaches this study will examine the time series properties of rugby league attendence and success prior to engaging in estimation

policy changes in major league baseball improved agent behavior and ancillary productivity outcomes offense in major league baseball mlb has decreased substantially since 2006 often attributed to increased testing and punitive action for use of performance enhancing drugs however there has been concurrent policy change affecting behavior of other league agents that may have also affected game play i therefore examine the effect of these agents mlb umpires on offensive production in baseball estimates reveal that a substantial portion of the offensive reduction from 2008 through 2014 can be attributed to changes in the size of the strike zone implications are further discussed in the context of firm production relevant outcomes as they relate to the labor force and supervisor performance expectations jel j44 z22 z28 l25

our fans in the north the demand for british rugby league this paper reports the results of estimating a single equation model of an attendance function for british rugby league over the seasons 1982 83 to 1990 91 the data are panel data covering virtually every team which played in the two division league over the nine year time period diagnostic tests indicate that the appropriate model is a semilog random effects model where the dependent variable is league attendance weighted by population the major results are as follows there are significant positive relationships between league attendance and various measures of team success although the direction of causality is moot team quality as proxied by the two divisions and the economic quality of team location as proxied by the unemployment rate but there is no discernible relationship between league attendance and either success in nonleague trophy competitions or measures of exceptional player quality

scaling in economics a reader s guide this paper discusses examples of scaling laws in economics and finance it argues that these regularities in data are useful for disciplining theory formation estimation of the conditional predictive distribution and estimation of impulse response functions is a main goal of econometric work scaling type regularities give useful information on the underlying data generating process the ability of scaling laws to suggest lines of potentially fruitful research was illustrated by the suggestion of several speculative research projects in this paper most importantly the paper stresses the challenges that face empirical and theoretical researchers who wish to make use of scaling law type regularities to improve econometric identification of the underlying causal data generating mechanism copyright 1999 by oxford university press

do high income or low income immigrants leave faster we estimate the impact of the income earned in the host country on return migration of labor migrants from developing countries we use a three state correlated competing risks model to account for the strong dependence of labor market status and the income earned our analysis is based on administrative panel data of recent labor immigrants from developing countries to the netherlands the empirical results show that intensities of return migration are u shaped with respect to migrants income implying a higher intensity in low and high income groups indeed the lowest income group has the highest probability of return we also find that ignoring the interdependence of labor market status and the income earned leads to an overestimating the income effect on departure keywords migration dynamics labor market transitions competing risks immigrant assimilation

the demand for english league football a club level analysis a demand equation is estimated for 19 large urban based english football league clubs over the period 1962 3 to 1991 2 in order to analyse the economic determinants of club attendances while controlling for football specific factors attendances are measured with and without correction for admission of season ticket holders using an error correction specification to model attendances it is shown that both adjusted and unadjusted attendances respond to real ticket prices in the long run in 17 and 18 clubs respectively the price elasticity is typically larger for adjusted attendances suggesting that casual spectators are more price sensitive than season ticket holders among football specific factors league position goals scored and promotion and relegation between the divisions are all important determinants of attendance patterns

wage assimilation of immigrants and internal migrants the role of linguistic distance this paper investigates the wage assimilation of foreign immigrants and internal migrants in italy comparing them with stayers control for the selection in out migration is performed using a new

the economic design of sporting contests what is the optimal number of entrants in a race or the optimal number of teams in a baseball league what is the optimal structure of prizes for a golf tournament or degree of revenue sharing for a football championship how evenly balanced should the competing teams be in the nascar or formula one championships what is the maximum number of entrants per nation to the olympic games that should be permitted what quota of qualifying teams to the soccer world cup should be allocated to the developing nations

auctionin entry into tournaments a research tournament model with heterogeneous contestants is presented for a large class of contests the optimal number of competitors is two this insight makes designing the tournament easier and highlights the importance of selecting highly qualified contestants while customary uniform price and discriminatory price auctions are intuitively appealing mechanisms for solving this adverse selection problem in practice they generally will not be efficient mechanism for selecting contestants instead we propose an alternative auction format that is equally simple to implement and efficiently selects the most qualified contestants to compete regardless of the form of contestant heterogeneity

attendance demand and core support evidence from limited overs cricket in this paper we construct and estimate a model for match attendances in english one day limited overs league cricket our dataset separates pay at gate spectators from club members enabling us to distinguish between the attendance decisions of casual spectators and those of the potentially more committed core supporters in addition to providing a more direct analysis of the relatively underdeveloped issue of core support we also investigate variability within the core apart from providing further evidence regarding demand determination in professional team sports we consider some specific policy implications particular to the peculiar sport of cricket

incumbent performance and electoral control in the pure theory of electoral competition citizens compare the platforms of the candidates and vote for the one whose platform is preferred candidate strategies are identified with promises about future performance in office models of this sort have been developed in both static mckelvey 1975 and dynamic kramer 1977 i settings and all appear to have the property that if the set of alternatives is large enough in some sense equilibrium platforms rarely exist but these models have another feature that is quite as disturbing as their instability in the static setting discussed by mckelvey little attention is paid to the possibility that once in office the politician s preferences may diverge from those of his constituents and that he may therefore choose policies at variance from his platform instead it is simply assumed that promises will be kept whether or not such behavior is congruent with the interest of the officeholder it is sometimes argued that an enforcement mechanism may exist to discipline politicians for failing to keep promises but without a specification of the mechanism it is not obvious that it would be in the interests of the

the impact of labor strikes on consumer demand an application to professional sports the primary bargaining power of organized labor is its ability to withdraw labor from the rm in the form of a strike from the workers perspective a strike is intended to impose substantial costs upon the rm over time as these costs accumulate the rm develops an appreciation of the solidarity of labor and may eventually surrender to the demands of the workers orley c ashenfelter and george e johnson 1969 note that the strike also serves the function of informing the workers to the reality of the rm s position although the union leadership may recognize early in negotiations that the rm cannot or will not meet the workers demands the rank and le of the union often do not understand the impracticality in their position until the workers have struck and the rm fails to surrender whether strikes ultimately serve as a lesson to workers or rms is partially impacted by the extent to which such events impart costs upon both the rm and the industry for example brian e becker and craig a olson 1986 examined the relationship between worker strikes and changes in shareholder equity these authors found that on average a strike of at least 1 000 workers would reduce shareholder equity by 4 1 percent richard a de fusco and scott m fuess jr 1991 examined airline carriers and found that strikes tended to redistribute wealth from shareholders of those airlines which experienced a strike to shareholders of airlines that had management labor peace furthermore richard mchugh 1991 investigated the impact of a labor strike on both the rm and organizations linked as purchasers or suppliers surprisingly the impact of the strike was greater for the linked rm than it was for the rm directly experiencing the worker strike each of the aforementioned studies found that strikes impose costs on the rm these costs generally centered on the loss of output the rm experienced during the duration of the management labor con ict previous studies have largely neglected the possible extended costs associated with the reactions of the remaining party impacted by the worker strike the consumer although in many industries rms can increase inventories prior to a worker strike this is not true in all industries within the airline industry for example labor strikes temporarily force consumers to either consume the production of other suppliers or live without the particular good or service this outcome leads to the question we investigate do work stoppages permanently impact consumer demand when the struck rm is unable to meet demand during the labor strike a natural setting to explore this issue is the professional sports industry in such an industry worker strikes can completely remove the output from the consumer s consumption basket unlike strikes in other industries though consumers of the output from the professional team sports industry frequently threaten to withdraw all future demand if worker strikes are not avoided or ended quickly this threat has led industry insiders to claim that labor strikes might destroy the professional sports league experiencing management labor dif culty

pay equality and industrial politics personnel managers often argue that equitable pay treatment manifested as wage compression is useful because it reduces disharmony among workers but it is far from obvious that a compressed salary structure is morale improving since better workers may feel disenchanted by this scheme however when workers rewards are based on relative comparisons salary compression reduces uncooperative behavior that is detrimental to the firm relative comparisons imply that some reference group must be selected the major result is that within the relevant groups some wage compression is efficient

the combined effect of salary restrictions and revenue sharing in sports leagues i introduction invariance principles are the golden eggs of economics franco modigliani merton miller and ronald coase were awarded nobel prizes for their formulations of important invariance principles a predecessor of the famous coase theorem is rottenberg s invariance proposition according to rottenberg 1956 the distribution of playing talent between clubs in professional sports leagues does not depend on the allocation of property rights to players services el hodiri and quirk 1971 fort and quirk 1995 and vrooman 1995 extend this invariance proposition to gate revenue sharing based on their models they claim that revenue sharing does not change the level of competitive balance within a league this form of invariance proposition has become one of the most heavily disputed issues in sports economics because its centerpieces revenue sharing and the uncertainty of outcome hypothesis represent two of the most important idiosyncrasies in the professional team sports industry according to the uncertainty of outcome hypothesis fans prefer to attend games with uncertain outcomes and enjoy close championship races unlike toyota which benefits from weak competitors in the automobile industry real madrid and the new york yankees need strong competitors to maximize their revenues in sports a weak team produces a negative externality on its stronger competitors revenue sharing arrangements have been introduced as a measure to improve the competitive balance by partially internalizing this externality if the invariance proposition held revenue sharing would be worthless current revenue sharing schemes vary widely among professional sports leagues all over the world in north america the most prominent is possibly that operated by the national football league nfl where the visiting club secures 40 of the locally earned television and gate receipt revenue in 1876 major league baseball mlb introduced a 50 50 split of gate receipts that was reduced over time since 2003 all the clubs in the american league have put 34 of their locally generated revenue gate concession television etc into a central pool which is then divided equally among all the clubs the national basketball association nba and the national hockey league nhl also operate with a pool sharing arrangement moreover in the australian football league afl gate receipts were at one time split evenly between the home and the visiting team this 50 50 split was finally abolished in 2000 other measures to increase competitive balance are salary caps and floors a salary cap floor puts an upper lower bound on a club s payroll since most leagues compute their salary caps and floors on the basis of the revenues of the preceding season caps and floors can be treated as fixed limits the nba was the first league to introduce a salary cap for the 1984 1985 season for the 2008 2009 season the soft salary cap is fixed at us 58 7 million today salary caps are in effect in professional team sports leagues all over the world in the nhl for example each team had to spend between us 34 3 million and 50 3 million on player salaries in the 2007 2008 season in the nfl the salary cap in 2009 is approximately us 128 million per team whereas the salary floor was 87 6 of the salary cap which is equivalent to us 112 1 million the afl also operates with a combined salary cap and floor for 2009 the salary cap was fixed at a 7 69 million the floor at 7 12 million another australian league the national rugby league nrl has implemented a salary cap and floor system which forced each team to spend between a 3 96 million and 4 4 million in 2009 in europe salary caps are in effect in the guiness premiership in rugby union and the super league in rugby league 1 in most industries payroll caps would be regarded as an exploitation of market power and would be prohibited by anti trust authorities

vote splitting as insurance against uncertainty the present article offers a rational choice explanation for political ticket splitting it considers a game theoretic model of voting and bargaining within congress and between congress and the president when parties are ideologically oriented and voters utilities are state dependent the model shows that if there is uncertainty about the true state of the world ticket splitting emerges as a tool risk averse voters use in order to insure themselves against extreme policies in bad states of nature

why do migrants return to poor countries evidence from philippine migrants responses to exchange rate shocks abstract this paper distinguishes between target earnings and life cycle motivations for return migration by examining how philippine migrants return decisions respond to major unexpected exchange rate changes in their overseas locations due to the asian financial crisis overall the evidence favors the life cycle explanation more favorable exchange rate shocks lead to fewer migrant returns a10 improvement in the exchange rate reduces the 12 month return rate by 1 4 percentage points however some migrants appear motivated by target earnings considerations in households with intermediate foreign earnings favorable exchange rate shocks have the least effect on return migration but lead to increases in household investment

campaign finance and voter welfare with entrenched incumbents two candidates compete for elective office each candidate has information she would like to reveal to the voters but this requires costly advertising the candidates can solicit contributions from interest groups to finance such advertising these contributions are secured by promises to perform favors for the contributors should the candidate win the election voters understand this and elect the candidate they like best taking into account their expectations about promises to special interests there is an incumbency advantage in fundraising which is sometimes so great that the incumbent faces no serious opposition at all introducing partial public financing through matching funds improves voter welfare in districts that have advertising under the decentralized system while it can reduce welfare in other districts the optimal policy must strike a balance between these two effects

zipf s law for cities an explanation zipf s law is a very tight constraint on the class of admissible models of local growth it says that for most countries the size distribution of cities strikingly fits a power law the number of cities with populations greater than s is proportional to 1 s suppose that at least in the upper tail all cities follow some proportional growth process this appears to be verified empirically this automatically leads their distribution to converge to zipf s law

the probability of return migration migrants work effort and migrants performance abstract this paper demonstrates that differences in earnings between migrants and the native population may reflect differences in incentives rather than differences in characteristics the analysis indicates that in the presence of a positive probability of return migration migrants work effort is higher than that of comparable native born workers this differential may explain why even if all workers are perfectly homogeneous in skills migrants often outperform the native born workers in the receiving economy

global talent flows the global distribution of talent is highly skewed and the resources available to countries to develop and utilize their best and brightest vary substantially the migration of skilled workers across countries tilts the deck even further using newly available data the paper first reviews the landscape of global talent mobility which is both asymmetric and rising in importance next the determinants of global talent flows at the individual and firm levels are presented and some important implications are sketched third the national gatekeepers for skilled migration and broad differences in approaches used to select migrants for admission are reviewed looking forward the capacity of people firms and countries to successfully navigate this tangled web of global talent will be critical to their success

the economics of temporary migrations many migrations are temporary a fact that has often been ignored in the economic literature on migration such omission may be serious in that expected migration temporariness can impart a distinct dynamic element to immigrants economic behavior generating possible consequences for nonmigrants in both home and host countries in this paper we provide a thorough examination of the various aspects of temporary migrations that matter for the analysis of economic phenomena we demonstrate the extent of temporary migrations in population movements we show how temporariness can affect the various economic choices and how better data have improved both the measurement of nonpermanent migrations and the analyses of various aspects of migrant behavior we propose a general theoretical framework for modeling temporary migration decisions based on which we outline the various motives for temporariness while simultaneously reviewing related literature and available data sources we discuss the possible consequences of migration temporariness for nonmigrants in both home and host countries jel f22 f24 j11 j61 k37 o15

league level attendance and outcome uncertainty in u s pro sports leagues we extend the breakpoint literature regarding annual league level attendance and the impact of outcome uncertainty to the national basketball association national football league and national hockey league as our measures are different than past work on baseball we also apply our model to the american and national leagues attendance series for each league under consideration are not stationary overall but are stationary with break points no form of outcome uncertainty game play off or across seasons matters for attendance in hockey or baseball regardless of which game uncertainty variable is used under the measure of game uncertainty that recommends itself for football only play off uncertainty matters for attendance whether outcome uncertainty matters for basketball depends on the measure of game uncertainty situational similarities in the break points across leagues suggest general areas for future research jel l83 c22

everyone likes a winner an empirical test of the effect of electoral closeness on turnout in a context of expressive voting under instrumental voting closer elections are expected to have higher turnout under expressive voting however turnout may increase with decreasing closeness when voters have a preference for winners an empirical test using data on belgian municipal elections supports this we find that turnout reaches a local maximum when the largest party in the election obtains just over 52 of the seats and then falls supporting the instrumental closeness argument there is however another turning point the presence of a highly dominating party receiving at least two thirds of the votes stimulates turnout despite the fact that dominance implies lower closeness

adoption curves and social interactions this paper considers the observational implications of social influences on adoption decisions for an environment of perfect foresight adopters we argue that social influences can produce two observable effects 1 discontinuities in unconditional adoption curves and 2 pattern reversals in conditional adoption curves in which earlier adoption is found for one group of actors versus another when fundamentals suggest the reverse ordering should occur in turn the presence of either of these features can under weak assumptions be interpreted as evidence of social influences as such these properties are robust implications of social effects jel c40 d01 o33

team roster turnover and attendance in major league baseball empirical support is shown for the propositionthat sports fans prefer the composition of their home team to remain the same from season to season controlling for price income population team quality league year the stadium effects the regression results indicate that for each percentage point increase in the turnover of the composition of the team attendance will fall by about 0 7 the implications of this heretofore ignored tendency are briefly discussed

strategic campaigns and redistributive politics the article investigates strategic informative campaigning by two parties when politics concern redistribution voters are uncertain about whether parties favour special groups parties will target campaigns on groups where most votes are gained by informing about policies in equilibrium campaigning will be most intensive in groups where the uncertainty is largest and where voters are most mobile most likely to vote most receptive to campaigns and relatively uninformed initially these groups will become more informed about policy parties will therefore gain more votes by treating these groups well so these groups will gain from strategic campaigning welfare effects are assessed

impact of league restructuring on team sport attendances the case of rugby league an econometric analysis of attendances at rugby footbal league matches in england over the period 1966 1990 is presented the major finding is that the move from one to two leagues in 1973 had a substantial impact on attendances teams in the upper league experienced greater attendances ceteris paribuswhilst those in the lower league had reduced attendances

electoral competition and special interest politics have fixed positions on some issues but vary their positions on others in order to attract votes and campaign contributions in this context we examine whether special interest groups are governed by an electoral motive or an influence in their campaign giving and how their contributions affect the equilibrium platforms we show that each party is induced to behave as if it were maximizing a weighted sum of the aggregate welfares of informed voters and members of special interest groups the party that is expected to win a majority of seats caters more to the special interests

on the evolution of competitive balance the impact of an increasing global search the coase theorem maintains that where free market precepts exist the allocation of property rights does not impact the distribution of resources an application to major league baseball suggests that institutions such as free agency and the reverse order amateur draft would not impact player distributions and therefore would not impact competitive balance the present study finds that the distribution of wins is generally consistent with the precepts of the coase theorem and therefore suggests a course for those who wish to alter the level of competitive balance major league baseball should increase its focus on expanding the size of its labor pool jel o15 l83 c22

the impact of labour market dynamics on the return migration of immigrants using administrative panel data on the entire population of new labour immigrants to the netherlands we estimate the effects of individual labour market spells on immigration durations using the timing of events method the model allows for correlated unobserved heterogeneity across migration unemployment and employment processes we find that unemployment spells increase return probabilities for all immigrant groups while re employment spells typically delay returns

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

attendance and pricing at sporting events empirical results from granger causality tests for the melbourne cup this study applies granger causality tests to examine the relationship between attendance admission prices and real income at the melbourne cup which is australia s premier horseracing event and one of the world s leading handicap races the motivation for the paper is that while market demand suggests that causation should run from admission price to attendance it is equally plausible that sporting authorities could alter admission prices in response to a change in demand reflected in attendance the main findings are that in the short run there is unidirectional granger causality running from income to attendance attendance to admission price and income to admission price while in the long run both admission price and income granger cause attendance

spatial models of political competition under plurality rule a survey of some explanations of the number of candidates and the positions they take this paper surveys work that uses spatial models of political competition to explain the number of candidates and the positions that they take in plurality rule elections

testing coase theorem the case of free agency in nba this study seeks to test the applicability of the coase theorem to the allocation of players within according to the coase theorem a player s final allocation would be the same no matter who has ownership of his playing rights if there are no transaction costs what ownership affects is just the allocation of wealth using data from the national basketball association nba this article argues that player mobility is likely to be affected by player ownership due to transaction cost imposed by the institution it is also concluded that performance indicators used for value estimation vary by position and that this also affects player transfer

political competition with campaign contributions and informative advertising this paper presents a theory of political competition with campaign contributions and informative political advertising policy motivated parties compete by selecting candidates and interest groups provide contributions to enhance the electoral prospects of like minded candidates contributions are used to finance advertising campaigns that provide voters with information about candidates ideologies voters update their beliefs rationally given the information they have received the paper uses the theory to analyze the welfare economics of contribution limits such limits are shown to redistribute welfare from ordinary citizens to members of interest groups jel d72 h40

global labour markets return and onward migration there is increasing evidence that international migration is characterized by frequent return and onward migration this has important consequences for the contribution of immigrants to the economy of the host country lack of longitudinal data has prevented much analysis of how frequently international migration involves a sequence of location decisions or how long the typical migrant stays in a host country a newly available longitudinal data set covering all immigrants to canada since 1980 provides the opportunity to address these issues the results show that a large fraction of male immigrants who are of working age especially among skilled workers and entrepreneurs are highly internationally mobile les flux migratoires internationaux sont caracterises par des retours frequents au pays d origine mais aussi par des departs vers une nouvelle destination voila qui a des consequences importantes pour la contribution des immigrants a l economie du pays d accueil le manque de donnees longitudinales a empeche jusqu ici le developpement d analyses de la frequence de ces migrations internationales qui impliquent une sequence de decisions de relocalisation et de la longueur du sejour de l immigrant typique dans un pays d accueil une nouvelle source de donnees longitudinales couvrant tous les immigrants vers le canada depuis 1980 permet d analyser ces questions les resultats montrent qu une forte fraction des hommes immigrants en ge de travailler et particulierement s il s agit de travailleurs specialises et d entrepreneurs sont tres mobiles internationalement

an empirical equilibrium search model of the labor market in structural empirical models of labor market search the distribution of wage offers is usually assumed to be exogenous however because in setting their wages profit maximizing firms should consider the reservation wages of job seekers the wage offer distribution is essentially endogenous we investigate whether a proposed equilibrium search model in which the wage offer distribution is endogenous is able to describe observed labor market histories we find that the distributions of job and unemployment spells are consistent with the data and that the qualitative predictions of the model for the wages set by employers are confirmed by wage regressions the model is estimated using panel data on unemployed and employed individuals we distinguish between separate segments of the labor market and we show that productivity heterogeneity is important to obtain an acceptable fit to the data the results are used to estimate the degree of monopsony power of firms further the effects of changes in the mandatory minimum wage are examined

location and survival in the national hockey league a model of professional sport franchises is introduced and used to explore the locational and other determi nants of profitability particular attention is paid to the effect of location on attendance market power and long run team quality whe n estimated using data for the national hockey league in 1977 78 the model indicates that location has an effect on each of these and tha t their combined effect on profitability is effective in explaining p rior and subsequent decisions concerning league expansion and franchi se relocation a number of other matters are also addressed includin g league arguments for antitrust exemption and league policies to res trict expansion copyright 1988 by blackwell publishing ltd

campaign advertising and voter welfare this paper investigates the role of campaign advertising and the opportunity of legal restrictions on it an electoral race is modeled as a signalling game with three classes of players many voters two candidates and one interest group the group has non verifiable insider information on the candidates quality and on the basis of this information offers a contribution to each candidate in exchange for a favorable policy position candidates spend the contributions they receive on non directly informative advertising this paper shows that 1 a separating equilibrium exists in which the group contributes to a candidate only if the insider information about that candidate is positive 2 although voters are fully rational a ban on campaign advertising can be welfare improving and 3 split contributions may arise in equilibrium and if they arise too often they are detrimental to voters

spatial competition and strategic firm relocation firms compete spatially for customers who have some degree of brand loyalty the number and attractiveness of the alternatives available to these customers dictates the level of competition facing firms in this study data on ticket pricing in four professional sports leagues are used to empirically examine the existence of spatial competition in sports and the impact of space on team relocations results allowing for structural breaks over time while using spatial autoregressive techniques suggest that sports franchises spatially compete when pricing their tickets and that spatial characteristics including the level of spatial competition have influenced the relocation of teams jel d40 l11 r30 l83

the incidence of overdissipation in rent seeking contests tullock s analysis of rent seeking and overdissipation is reconsidered we show that while equilibrium strategies do not permit overdissipation in expectation for particular realizations of players mixed strategies the total amount spent competing for rents can exceed the value of the prize we also show that the cross sectional incidence of overdissipation in the perfectly discriminating contest ranges from 0 50 to 0 44 as the number of players increases from two to infinity thus even though the original analysis of overdissipation is flawed there are instances in which rent seekers spend more than the prize is worth

the demand for cricket the case of the john player league multiple regression analysis is used to estimate attendance functions 1976 and 1977 for the john player league one of the one day competitions in english top class cricket likely determinants of attendance are grouped according to whether they are economic locational team performance player attraction seasonal and residual preference factors the results suggest implications for the management of the game in respect of pricing strategy scheduling the structure of competition player qualification rules payment scales and television policy

performance and revenue in professional league football evidence from granger causality tests using a dataset comprising annual performance measured by final league position and gate revenue for 77 football league clubs which maintained unbroken league membership between 1946 and 1994 the relationship between performance and revenue is investigated using cointegration and causality tests a cointegrating relationship between performance and revenue is established in only 10 cases out of 77 although it is argued that some caution is required in interpreting these results due to the low power of the relevant tests in relatively small samples in granger causality tests more evidence is found of causality running from lagged revenue to current performance than of causality in the opposite direction while the dependence of performance on revenue seems to be greater for the smaller clubs than for the larger these results lend empirical support to the popular view that unless checked by mechanisms for revenue redistribution within the league the natural tendency is for success to become concen

appointment procedures and fomc voting behavior an important issue for the conduct of monetary policy in the united states is whether the various appointment procedures of members of the federal open market committee help determine their voting behavior it is usually asserted that the method by which district bank presidents are appointed leads to more independence and or more conservative behavior increased independence is generally believed to reduce suboptimal short run manipulation of monetary policy but at the cost of reducing the central bank s accountability to the country s short run and longrun objectives the social desirability of any potential differences in monetary policy resulting from these appointment procedures and the optimality of discretionary policy in general are not addressed in this paper however instead the effect on monetary policy of the different appointment procedures currently in place within the federal reserve system is examined does the increased independence that the district bank presidents supposedly possess produce significantly different monetary policy from that of the politically appointed board governors many studies have examined the effects various appointment procedures may have on voting at the fomc and the results have been somewhat mixed belden 2 chappell havrilesky and mcgregor 3 havrilesky and gildea 6 and puckett 8 find that bank presidents tend to vote for tighter policy than board governors while tootell 10 finds no differences between the two groups most of the literature has concluded that in some unclearly defined way and for no clear theoretical reason the more independent district presidents are more conservative than the board governors in this paper conservative is defined over several clear dimensions in order to test whether district presidents vote more conservatively than board governors some slight variation in the voting behavior of bank presidents and board governors is found but the causes of any dissimilarities are shown to be much different from those asserted in the earlier literature

collective versus individual sale of television rights in league sports in many countries the collective sale of tv rights by sports leagues has been challenged by the antitrust authorities in several cases however leagues won in court on the ground that sport cannot be considered a standard good in this paper we investigate the conditions under which the sale of tv rights collectively by sports leagues rather than individually by teams is preferred from a social welfare viewpoint we find that collective sale is socially preferable when leagues are small relatively homogeneous in terms of clout and where teams get little performance related revenues

a model of political competition with citizen candidates the authors develop a model of electoral competition in which citizens choose whether or not to run as candidates a winner implements her favorite policy the equilibrium number of candidates depends negatively on the cost of running and positively on the benefits of winning for some parameter values all equilibria under plurality rule have exactly two candidates whose positions are distinct two candidate elections are more likely under plurality rule than under a runoff system the candidates positions are less differentiated under a runoff system there exist equilibria under both systems in which some candidates have no chance of winning

electoral competition with informed and uninformed voters i present a model of electoral competition in which candidates raise campaign contributions by choosing policies that benefit interest groups and then expend those contributions to influence voters who are uninformed about the policies informed voters however vote based on those policies so candidates face a trade off between choosing a policy to generate funds to attract the uninformed vote and choosing a policy to attract the informed vote electoral equilibria are characterized for two categories of policies particularistic and collective in the case of particularistic policies the equilibrium policies of the candidates are separated if the proportion of uninformed voters is sufficiently high and the degree of separation is an increasing function of that proportion the model is extended to include the public financing of elections and incumbency advantages for the case of collective policies the candidates locate at the median of the ideal points of the informed voters and contributions are zero

free agency competitive balance and diminishing returns to pennant contention e woodrow eckard this article argues that the 1976 introduction of free agency increased competitive balance in major league baseball the evidence is based on a new empirical measure that captures the key dynamic element of balance year to year fluctuations in team performance my hypothesis is that diminishing returns to each additional year s production of a pennant contending team reduces the incentive to bid continually for top players free agency allows talent to be reallocated more readily to potential new contenders given that player sales had been restricted prior to 1976 the hypothesis is supported by evidence of declining attendance during contending streaks jel l83 i introduction since the inception of free agency in major league baseball mlb over 20 years ago its effect on competitive balance has been controversial for almost a century the reserve system had assigned de facto property rights in players services to mlb teams this changed after 1976 when veteran players were allowed to unilaterally sell their services to the highest bidder team owners predicted a consequent decline in competitive balance arguing that large market clubs would outbid others for talent and come to dominate this claim is still made today as the basis for major restructuring proposals such as new restrictions on player salaries and mobility team payroll caps and various cross subsidization schemes 1 economists have examined the issue from both theoretical and empirical angles theorists such as el hodiri and quirk 1971 implicitly agree with the owners that the best players concentrate where their marginal revenue products mrps are the highest that is in high demand cities that also may be the most populous debate has revolved instead around rottenberg s 1956 invariance proposition which states that the distribution of playing talent will be the same under both systems if player sales are unrestricted teams where mrps are the highest purchase the services of the best players whether from other low mrp clubs or directly from the players themselves free agency therefore should not affect competitive balance critics such as daly 1992 argue that before 1976 first line players seldom were sold so the invariance proposition does not apply several studies examine empirically the effect of free agency on competitive balance taken together the results are consistent with the invariance proposition namely balance did not change this article argues that these studies use balance measures that ignore a critical aspect of competition namely year to year changes in a team s position in league standings using empirical measures that capture this dynamic i report new evidence that balance improved after free agency i then extend the existing theory of sports leagues to explain why free agency might cause such an outcome and provide an independent test of the theory specifically there are diminishing marginal returns to each additional year s production of a pennant contending team reducing the incentive to bid continually for top players this allows also rans to obtain the talent necessary to improve their performance and become contenders i also provide evidence that quality players were seldom sold under the old reserve system ren dering the invariance proposition moot the article is organized as follows the next section reviews the relevant theoretical and empirical literature section iii describes my measures of competitive balance and section iv presents empirical results comparing balance in mlb before and after free agency section v provides evidence that sales of first line players were sufficiently rare as to nullify the invariance proposition section vi presents the theoretical argument linking free agency to an improvement in balance followed by a supporting empirical test in section vii section viii summarizes and concludes the article

digging for golden carrots an analysis of research tournaments contracting for research is often infeasible because research inputs are unobservable and research outcomes cannot be verified by a court sponsoring a research tournament can resolve these problems a model is presented in which contestants compete to find the innovation of highest value to the tournament sponsor the winner receives a prespecified prize the tournament game has a unique subgame perfect equilibrium free entry is not optimal because equilibrium effort by each researcher decreases in the number of contestants an optimally designed research tournament balances the probability of overshooting the first best quality level against the probability of falling short copyright 1995 by american economic association