Competitive Balance

1
Competitive Balance

• What it is
• What it means

2
Leagues Want It

• Stimulates interest
• Attendance
• TV Ratings
• Baseball owners particularly complain
• Are Yankees bad for baseball?
• Should New York win more often?
• What is competitive balance?
• Even competition in each game?
• Turnover among champions?

3
Turnover in Champions?

• 1949
• Yankees beat Dodgers
• 1950
• Yankees beat Phils
• 1951
• Yankees beat Giants
• 1952
• Yankees beat Dodgers
• 1953
• Yankees beat Dodgers
• 1954
• Giants beat Indians

• 1955
• Dodgers beat Yankees
• 1956
• Yankees beat Dodgers
• 1957
• Braves beat Yankees
• 1958
• Yankees beat Braves
• 1959
• Dodgers beat White Sox

4
The Hirfindahl-Hirschman Index

• HHI quantifies turnover in champions
• Asks How concentrated is winning?
• How much do a few teams dominate?
• Also used to measure monopoly power
• Let fichampionships by team I
• Tteams NYears

5
Applying HHI to Baseball in 1950s

• 1950s American League Champions
• Yankees (8) Indians White Sox
• HHI6.6
• 1950s National League Champions
• Dodgers (5) Giants (2) Braves (2) Phillies
• HHI3.4

6
Applying HHI to Baseball in 1990s

• 1990s AL Champions
• Yankees (3) Indians (2) Blue Jays (2) Twins
  Athletics
• HHI2.1
• 1990s NL Champions
• Braves (5) Reds Phillies Marlins Padres
• HHI3.2
• Conclusion of HHI measure
• League Championships less concentrated in 1990s

7
Nostalgia Aint What it Used To Be

• From 1949 through 1966
• Yankees, Dodgers, or Giants played in every World
  Series
• 2 of them played each other in 8 of 18
• Yankees in 14 of 18
• Yankees in over 25 of all World Series
• Nothing new under the sun

8
Is Baseball Unique?

• In 1960s only 2 NBA champions
• Celtics Champions 1960-66, 1968-69
• Since 1990 only 4 NBA champions
• Bulls 1990-1993
• Rockets 1994-1995
• Bulls 1996-1998
• Spurs 1999
• Lakers 2000-2002
• Spurs 2003
• Similar results for hockey

9
How about Evenness of Competition?

• Use standard deviation of winning
• Problem
• Cannot compare across league
• Cannot compare across seasons
• Why not?
• Key innovation compare to ideal
• Teams evenly matched
• Games decided by flip of coin
• Why dont all teams win half their games?

10
Ratio of actual to ideal

• T teams
• N Games
• WPi Winning Percentage of team i

11
Interpreting the Ratio

• Why take ratio?
• More games gt larger standard deviation
• Can now compare across leagues/years
• As a rule R gt 1
• R1 Absolutely balanced
• Outcomes randomly determined
• As R rises
• Imbalance worsens

12
Is Baseball Worst?

• No
• In general MLB in the middle
• NFL by far the most balanced
• NBA by far the least balanced
• Extra Credit
• Pick 2 years from MLB, NBA, NFL, or NHL
• One from 1960 1975 one from 1980-2000
• Compute R show work
• Compare competitive balance in 2 years

13
How to Promote Competitive Balance?

• Owners promote restriction on players
• Reverse order draft
• Restrictions on free agency
• Salary caps
• Luxury tax on salaries
• All promote monopsony power
• Did it ever work?
• Several punish success
• An alternative
• Tax based on exogenous advantage city size