Michael Davis, Nick Watanabe, and I are organizing North American Association of Sports Economists (NAASE) sessions at this fall’s Missouri Valley Economics Association (MVEA) annual meeting. This year’s meeting is scheduled for Oct. 27 – Oct 29 in St. Louis, Mo at the Hyatt Regency at The Arch. We had 3 excellent sessions last year at the MVEA meeting in Kansas City. For more information about the conference and the MVEA, the MVEA website is MVEA.net.
The MVEA has a cash award for the Best Graduate Student Paper, so we encourage submissions by graduate students. This conference is an excellent place for students to work on their presentation skills and to show off their work.
You can submit abstracts to either Michael (firstname.lastname@example.org), Nick (email@example.com), or me (firstname.lastname@example.org). The deadline is August 16th, 2016.
The Braves area bad baseball team, and ticket demand is low. The manager has already been fired. With thousands of empty seats available at zero marginal cost, a good marketing plan seems like a timely effort.
Here is what the Braves have come up with: a monthly pass for $39. The pass is renewable, you can buy up to four, and your seat locations are assigned and sent to you by text an hour or two before each game.
The Cubs are in town this weekend. The novelty of the marketing and the quality of the opponent make this a very tempting proposition, even for a guy living 120 miles away.
So argues Daniel Frank in his piece “Inequality in the NBA“. Here are a couple of his observations:
As American politics gets consumed by discussions on income inequality, a similar problem is developing in the NBA. The NBA has created a hierarchy; super teams with multiple superstars competing for a championship, and everyone else, just watching on the treadmill….
LeBron James has been to the NBA finals six years in a row. Does this represent some sort of skill by Miami and Cleveland, putting them above the rest of the league? Have they done something deserving of this massive level of success? Or are they just lucky to have Lebron James sign with their team. In most cases, the acquisition of elite players is largely dependent on luck….
LeBron James has been to the NBA finals six years in a row. Many people attribute this to him being one of the best players in the NBA, but this misses the bigger picture. Give LeBron James a $53 million dollar salary and he won’t be in a position to be surrounded by stars like Kyrie Irving and Kevin Love (or Dwyane Wade and Chris Bosh) anymore. The max contract allows great players to team up with other stars, making these lucky teams elite.
These are just three snips from an interesting and provocative piece. Daniel’s argument takes the salary cap as a given, and the income cap as generating the unequal distribution of talent. This isn’t exactly Sports Econ 101, but it is certainly food for thought.
The Summer Olympics are just around the corner and the Spring 2016 issue of the Journal of Economic of Economic Perspectives has a paper on the economics of the Olympics. The paper is authored by two economists who have written extensively on the economics of mega events, Rob Baade and Victor Matheson. Here is a link to the paper. From the paper, here is Baade and Matheson on the cost of the bidding process.
“Bidding for the Olympics is no small undertaking. A key to the bidding process involves a visit by the Evaluation Commission of the International Olympic Committee which assesses the condition of the applicant city. A significant portion of the bidding expense relates to the preparations the applicant city undertakes to impress the Evaluation Commission, and these plans, including detailed architectural renderings, financial estimates, and pre-event marketing, are likely to be extensive since it cannot be known what the preparations of the other applicant cities will be. Chicago, for example, spent at least $70 million and perhaps over $100 million on its unsuccessful application to host the 2016 Games (Pletz 2010; Zimbalist 2015). But the costs of the formal bidding process pale in comparison to the expenses a region will incur should it actually be selected by the International Olympic Committee.”
Here is the information on the two references in the paragraph.
Pletz, John. 2010. “Chicago 2016’s Final Tally: $70.6M Spent on Olympics Effort.” Crain’s Chicago Business, May 17.
Zimbalist, Andrew. 2015. Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup. Brookings Institution Press.
Does Baseball’s Salary Arbitration Process Reduce Player Performance and Weaken Player-Club Relationships?
Guest Post by John Budd
Previous research on Major League Baseball’s final-offer salary arbitration process has found that players who lost in arbitration have subsequent lower on-field performance than those who won in arbitration. But what about simply going to arbitration rather than reaching a negotiated settlement? Does having a hearing and a new salary imposed by an arbitration panel affect player performance or the player-club relationship?
The conventional wisdom in dispute resolution indicates that arbitration should have negative consequences because the participants lose control of their own destiny, can’t tailor agreements to their liking, and feel less ownership in the process and the outcome. In 1974, Minnesota Twins pitcher Dick Woodson won the very first arbitration hearing but was traded to the richer New York Yankees less than three months later. The ability to tailor contractual outcomes to the fit the parties’ preferences can be constrained by the arbitration process. The arbitration process is also adversarial and the player hears all the reasons why the club feels he does not deserve the salary he is requesting. So this conventional wisdom predicts that players who reach a new salary agreement voluntarily will have better subsequent on-field performance and stay with their teams longer than players who have a salary imposed by the arbitration process.
But what happens in practice? This is the focus of our research article “Are Voluntary Agreements Better? Evidence from Baseball Arbitration” (John W. Budd, Aaron J. Sojourner, and Jaewoo Jung, forthcoming in Industrial and Labor Relations Review). To analyze these questions, we look at 1,400 salary re-negotiations between 1988 and 2011 that all involved exchanging salary demands prior to a potential arbitration hearing. Of these, 83% reached a negotiated settlement prior to an arbitration hearing and the remainder were settled via arbitration. We only include those who exchanged offers to try to remove as much heterogeneity as possible. In multivariate analyses, once we control for prior player performance, we do not find any statistically significant differences in on-field performance in the year immediately following arbitration. This might be due to players’ career concerns. Most arbitration-eligible players are early in their careers and their on-field performance is visible to other clubs. So a player has an incentive to set aside any residual feelings from the dispute-resolution process and to perform at a high level in order to position himself for subsequent contracts.
But there are not the same incentives to display positive behaviors in dimensions of performance that are harder for other clubs to see, such as clubhouse attitude. Indeed, in contrast to a lack of differences in on-field performance, we find that players who go to arbitration are significantly less likely to still be with the arbitration team at the end of the season—win or lose. In fact, even after controlling for prior player performance and other factors, arbitration nearly doubles the likelihood of a player not being with the same team at the end of the season. It seems unlikely that this result can be explained solely by clubs’ financial concerns. Start with the clubs that lose in arbitration. They might trade or release players because they are forced to pay more than they wanted, but even this isn’t clear because research has shown that arbitrated salaries are less than players’ market value. Even if we allow this to explain the effect for clubs that lose, what about clubs that win? In this case, it is hard to see how a purely financial reason would explain the result that the relationship is less durable because the club is paying less than they wanted. One might think that an arbitration-winning club might still look to trade a player if the club thinks it will be harder to retain the player in a future contract negotiation. But this implies a perception that some element of their relationship has been weakened by the arbitration process, either because of the adversarial nature of the process or the inability to tailor agreements to their liking. An arbitration-winning club might also trade or release a player if it expected or observed reduced player performance. We do not find performance differences observable on the field, but there could be differences in performance along dimensions that are hard for other teams (and us) to observe, such as clubhouse attitude.
One interpretation consistent with the pattern of results is that the arbitration process harms the player-club relationship and negatively affects player behaviors that are hard to observe (e.g., clubhouse attitude, loyalty to the team), but career concerns and/or loyalty to teammates and fans causes a player to continue to publicly perform at his usual level. This negative effect on the player-club relationship could also explain why there have typically been very few hearings in recent years.
“When a key responsibility of a manager is to allocate more or less attractive tasks, subordinates have an incentive to work hard and demonstrate their talents. As a new manager is less well informed, management dismissals reinvigorate this tournament competition—but only in sufficiently homogeneous teams. We investigate this hypothesis using a large dataset on dismissals of soccer coaches, whose main task is indeed the selection of players. We find that dismissals enhance performance (only) in homogeneous teams. Moreover, we show that there is typically a negative selection bias when evaluating succession effects, which reconciles previous contradictory findings. (JEL D22, J44, J63)”
That is from a newly-published article in the April 2016 issue of Economic Inquiry. The title of the article is “The Impact Of Managerial Change On Performance: The Role Of Team Heterogeneity” and it’s authored by Gerd Muehlheusser, Sandra Schneemann and Dirk Sliwka.
Cross posted at Market Power.
I wrote a short article for the Washington Post’s “In Theory” blog and it was published today. Here is the link.
When I read manuscripts submitted to or published in economic journals, it is not uncommon for authors to report the standard deviation of binary dummy variables (dummies with values equal to 0 or 1). I’m interested in the TSE’s readership take on whether reporting these standard deviations is useful.
Call for Papers – Missouri Valley Economics Association Conference in Kansas City – Extended Deadline
Michael Davis and I are arranging North American Association of Sports Economists (NAASE) – affiliated sports economics sessions for the 2015 Missouri Valley Economic Association (MVEA) conference in Kansas City, Mo. this October. The conference runs from October 22nd through October 24th. and will be held at the Kansas City Marriott Country Club Plaza. The deadline for submitting papers has been extended to August 28th, 2015.
If you have a sports economics paper you would like to propose to present, please email me or Michael a title, a brief abstract, and full contact information including affiliation, email address, mailing address, and phone number. Michael’s email address is email@example.com and my email address is firstname.lastname@example.org .
Here’s a link to the general call for papers for more information about the conference.
Michael Davis and I are arranging North American Association of Sports Economists (NAASE) – affiliated sports economics sessions for the 2015 Missouri Valley Economic Association (MVEA) conference in Kansas City, Mo. this October. The conference runs from October 22nd through October 24th. and will be held at the Kansas City Marriott Country Club Plaza.
Papers presented at the MVEA conference can be submitted to the MVEA’s peer-reviewed journal, The Journal of Economics, MVEA for $25, half off the normal submission fee. In addition, the MVEA gives a cash award for the Best Graduate Student Paper, so graduate students are encouraged to submit a paper proposal.
If you have a sports economics paper you would like to propose to present at this year’s MVEA conference, please email me or Michael a title, a brief abstract, and full contact information including affiliation, email address, mailing address, and phone number. The deadline for submissions is August 14th. Michael’s email address is email@example.com and my email address is firstname.lastname@example.org .