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A not so Super Bowl for NOLA

2013 February 4
by Victor Matheson

While last night’s Super Bowl was certainly filled with excitement on the field, the game may ultimately be best remembered for the the excitement in the utility room as the game was marred by a 34-minute delay due to a power outage at the stadium.

Economists have long taken issue with the NFL and organizing committees’ claims that the Super Bowl brings hundreds of millions of dollars to the host city. While New Orleans claimed a $434 million impact from the game, academic work looking back at past Super Bowls seems to find an identifiable increase of only about one-fifth of that. For example, my 2006 study with Rob Baade of Super Bowls from 1970-2001 found an average increase of just $92 million and was able to reject gains of $300 million or more at a 5% significance level.

When boosters are pressed on the economic data, they will inevitably turn to the claim that we are missing all of the great intangible benefits of the game. The game brings great publicity to the host city, it is said. I often counter that publicity doesn’t always have to be positive, and last night’s events provide one more story to add to the list. Instead of focusing on New Orleans’ fantastic cuisine, culture, nightlife, and music scenes, viewers around the nation were treated to the spectacle of a city that couldn’t even keep its lights on during the biggest night of the year. Not exactly the thing that gets captains of industry to relocate their businesses to the area.

Indeed, rather than a moment in the spot light, NOLA received a moment (34 minutes worth, in fact) in the no lights.

Forget ‘Fab Four’, Men’s Tennis Still More Competitive

2013 January 25
by Liam Lenten

As the Australian Open approaches the business end, this year’s instalment has developed a palpable sense of familiarity of recent years about it. Each of the top four seeded men made the semi-finals, and it’s hard to escape the feeling that fourth-ranked Rafael Nadal would have been in the place of his compatriot David Ferrer if he were present. And so we have the familiar trio of Andy Murray, Roger Federer and Novak Djokovic left standing.

The story in the women’s singles has been notably different, and not just to this stage. There were a sprinkling of upsets in the first week – earlier in the tournament only 3 of the top 16 men’s seeds were eliminated before the fourth round, compared to 7 casualties from the top 16 seeded women.

In comparing the sexes, it is worth reflecting how the modern era of tennis is arguably an unusual one in terms of the relative competitiveness in both the men’s and women’s games.

The current prevailing wisdom among occasional observers of the sport is that men’s tennis is highly predictable – at least until the semis where the fab four seem to meet more often than not, and that now, it is the women’s draw that offers a far more balanced and interesting proposition.

Historically, this is unusual – but long-passed are the successive eras of Margaret Court, Chris Evert/Martina Navratilova and Steffi Graf/Monica Seles. Back then, you could almost bet your vital bodily organs that any Grand Slam trophy would end up safely in one of only two or three possible pairs of female hands, even before a ball was served in anger. Meanwhile, the four majors seemed to be far more contestable on the male-side of the draw.

Things began to change in the early-to-mid 1990s – the rise of emerging women, such as Arantxa Sánchez Vicario, Mary Pierce, Martina Hingis and Lindsay Davenport, renewed interest in the women’s game. Concurrently, the Sampras/Agassi duopoly began to hold sway, as it would for the better part of the following decade.

A short period followed in which Jennifer Capriati and the Williams sisters dominated the majors, at a time when the male duopoly loosened its grip and other men, including Lleyton Hewitt, had comparable claims to slam titles.

In the decade since, however, other women such as Justine Henin and Maria Sharapova have once again challenged at the top to produce a more open field, while the ascension of Roger Federer, since joined by the other three members of the quartet, has made the men’s game look like a closed shop.

However, this prevailing wisdom is ill-informed. Many of us will only watch a handful of games on television during the Open. Locals, even certified tennis tragics, who go to Melbourne Park will not see many televised matches in the other months of the year, let alone live overseas.

In fact, the ATP and WTA tours each involve roughly 2,500 matches each year in the top-four tournament tiers (and the season-ending championships), and only an analysis of all of these matches can tell us the complete story of the overall tour, as opposed to merely anecdotal evidence at the very apex of the talent pool.

I was motivated to find whether this conventional wisdom was indeed true over the entire tours, and so having obtained data on all matches (excluding walkovers, retirements and disqualifications), I set out to find the answer. I went back as far as 2007 – the last year in which the fab four did not quadrella the end-of year rankings (Andy Murray would join them in 2008). During this period, Serena Williams found a way to win a further eight slam titles during her post-injury renaissance, but she hasn’t had it all her own way – she has only occupied the top end-of-year ranking spot once (twice finishing outside the top five).

One simple statistic would be the percentage of matches that go to a third set. For this, we would have to exclude best-of-five set men’s matches (mostly grand slam) to circumvent an unclean comparison.

On this score, more men’s matches are competitive, with 33.8% going to a deciding set compared to 31.2% of women’s matches (31.6% if grand slam matches are excluded for closer comparability).

Another sensible statistic is the proportion of matches where the favourite was beaten, as a measure of propensity for upsets. Only matches in which all (at least three) bookmakers odds were unanimous on the favourite were analysed.

Here, slightly more women’s matches were upsets (26.8% to 26.6%), but again, best-of-three and best-of-five matches are not comparable – statistically, the underdog is less likely to beat the favourite when the match is longer.

When grand slam matches are excluded for both sexes (plus a handful of other best-of-five tour event finals), the scales again tip in favour of the men (28.1 to 27.7%). The story was similar with two other metrics I investigated, specifically the median of the log-ratio of the betting odds and the average number of games won by the loser.

It is worth noting that these differences are not statistically significant, but it dispels the prevailing wisdom that elite women’s tennis has been more competitive in recent times.

I emphasise that this result should not be taken as an endorsement of men’s tennis over women’s; rather, it warns of the ever-present danger of various stakeholder groups in sport (or any other industry for that matter) making false inferences due to extrapolating on a small number of matches (or observations) to make crude generalisations without looking at the data in its entirety.

Ultimately, however, the title odds at Melbourne Park were more open on the women’s side two weeks ago. Therefore, next time you have to decide between watching a men’s and women’s match, there are numerous factors that will determine whether or not it will be an exciting and close match, so I would advise to simply use your own discretion.

Are the Marlins Spending Enough on Player Salaries?

2013 January 22
by Phil Miller

From HardBallTalk:

Barry Jackson of the Miami Herald spoke to a source within the MLB Players Association who says that if Marlins owner Jeff Loria doesn’t increase team payroll in the coming months, the union plans to pursue the issue with commissioner Bud Selig.

The MLBPA has successfully fought off a salary cap for years, but without a salary cap there is no salary floor either.  Instead the CBA contains minimum player salary amounts and contract language that gives the union some leverage if it feels a particular  team is not spending enough money on the players.  From the current CBA (page 130, paragraph a)

A principal objective of the Revenue Sharing Plan is to promote the growth of the Game and the industry on an individual Club and on an aggregate basis. Accordingly, each Club shall use its  evenue sharing receipts (from the Base Plan, the Supplemental  lan and the Commissioner’s Discretionary Fund) in an effort to improve its performance on the field

Of course “improving the performance” can come in many ways, and doesn’t necessarily have to come from increased spending on major league players.  A team can spend a lot on signing bonuses for draftees and on training and development in the minors.  It can go after an elite major league caliber coaching staff.Even though a team is not required per-se to put revenue sharing receipts into player salaries, the language gives the union some leverage if it feels a particular team is simply pocketing its receipts from sharing.

This isn’t the first time that this has happened to the Marlins.  According to the Jackson article, MLB, under force from the union, made the Marlins increase their payroll for 2010, 2011, and 2012.  Perhaps what is going on is Marlin owner Jeffrey Lorias trying to get back some of what he lost during those years.  In any case, the union is clearly concerned that Lorias is not acting in accordance to the CBA and will push the issue.  But according to the Jackson article, Lorias doesn’t believe Selig will penalize him a second time around.

But the Marlins privately believe MLB won’t force them to increase payroll during 2013 or before 2014 for a couple of reasons: They assert they lost $40 million last season and won’t make much, if anything, this season, because they expect attendance and associated ballpark revenue to plummet. MLB and the players union are given the Marlins’ books.

<snark>But wasn’t the new taxpayer-funded stadium supposed to allow the Marlins to field competitive teams by providing a revenue boost?</snark> The sub-lesson here is that if a city isn’t that keen on baseball, building a new stadium probably isn’t going to have the incremental effect of making it a baseball city.


Optimizing Isn’t Easy Even for Belichick

2013 January 21
by Brian Goff

Long time followers of TSE know that I have an ongoing interest in decision making in sports and how it may relate to decision making in broader contexts.   In an effort to deal with high levels of complexity, many managers in sports appear to adopt managing templates from other successful managers rather than attempting to decide on the spot regarding the optimality of a decision.  Maybe this is a way of condensing complexity or a risk averse reaction to possible criticism of unorthodox moves.   Some managers, however, such as Bill Belichick or Jim Harbaugh, seem less bound by a template and more willing to seek optimal, if unorthodox, strategies on a case by case basis.

Sunday’s New England/Baltimore AFC Championship game illustrates that such optimization by even someone like Belichick is very difficult.  Keith Goldner at Advanced NFL Stats provides a lengthy analysis of eight fourth down decisions by the Patriots.  At least by a simple model using league averages, Belichick went the wrong way (and surprisingly, the conservative way) seven out of the eight instances.    Goldner isn’t bashing Belichick.  In fact, he makes clear that several of these are relatively tight decisions complicated by factors not in the models.  For example, the fact that the Patriots were a sizable favorite changes the analysis some.  A team that has a sizable positive point differential increases the likelihood of an upset by engaging in riskier strategies that spread the distribution out more, even if they average point differential is not impacted.  In addition, blustery days like Sunday make the calls in the “no man’s zone” (the fringes of field goal territory) more difficult.  Also, although not mentioned my ANS, the manager’s forecast as to the offensive capability of the opponent matters.

The decision that caught my attention during the game was the 4 and 8 for the Patriots from the Ravens 34 with 11 minutes left in the 3rd quarter and the Patriots leading 13-7..  A 51 yard field goals had a low likelihood of success.  The ANS calculator shows a positive expected points in going for it over punting and by a decent margin.  The league average success rate in this length situation isn’t great, only 38 percent, but the Patriots are not an average offensive team.  In addition, a punt is likely to gain few yards, so a team who punts gives up a chance at possession with a very small likely gain.  A big, unmodeled influnce, though, is the 7 points for the Ravens.  They had not looked very potent on offense.  A 90 yard drive would seem less likely than league averages which are small.  This would seem to be the overriding influence on Belichick.

An interesting related aspect of this game is just how much the win probabilities turned on a few plays right before and right after this punt.  One can see that “threshold” or highly non-linear impact of a few key plays.   Wes Wekler’s drop on third down sticks out.  With that catch and the increased likelihood of a NE touchdown with them going up 20-7, the whole course of the game is changed.  Of course, the plays on first and second down turned out to be about as important along with the first few plays of the Ravens drive.

From Monopsony to Arbitration: Time to get Paid

2013 January 20
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by Phil Miller

♪♫I just got paid today, got me a pocket full of change♫♪

Last week saw the day by when arbitration-eligible players and their teams had to exchange final offers in Major League Baseball.  Baseball uses a variant of what is known as final offer arbitration, a type of arbitration (suggested by economist Carl Stevens in 1966) where the arbitrator renders a decision restricted to being one party’s offer or the other’s.   The word “final” is a misnomer in MLB since players and their teams may continue bargaining until a decision is rendered, so those offers really aren’t final.

One of the many interesting facets of baseball arbitration is what happens to players up for arbitration for the first time.  Mr. Buster Posey: your present experience may take the stand.

• Buster Posey: one-year, $8 million with San Francisco Giants

In his first year of arbitration, reigning National League MVP and two-time World Series champion Buster Posey received a hefty pay raise, going from $615,000 to $8 million. Despite his accolades, that’s a higher figure than most were expecting, but it’s likely this is just a precursor to an extension as the two sides are expected to begin negotiations soon. He’s under Giants control through 2016 regardless of that outcome.

If Posey is under Giants’ control for the next few years (meaning he is subject to the reserve clause), then why did he get nearly a $7.4M raise?  Part of it is that apparently the two sides are looking at a multi year deal according to the article, and part of it is that Posey is just that good of a player.  But a big part also depends on how baseball arbitration per-se is structured.

Players with less than 6 years of major league service are subject to the reserve clause, meaning that they are bound to their teams by the terms of the collective bargaining agreement (CBA).  Reserved players with at least 3 years of service are reserved, but they have option to go through baseball’s arbitration system.  So-called “super two” players, players with two years  but less than three years of service, can also go through the system.  To be a super two, a two year player must be in the top 22% of service time of all two year players with at least 86 days of service.  Players not eligible for arbitration are simply bound by the reserve clause.

The threat of arbitration, and its expected outcome in any particular case, drives the bargaining for arbitration eligibles.  According to baseball’s CBA, arbitrators can examine particular-defined criteria when rendering a decision (the quality of the player, his compensation record, disabilities of the player, the non-financial performance of the team, the length and consistency of the player’s career, and comparable baseball salaries).  It is that last one that is the biggie.

Arbitrators are given a list of comparable players (as defined by the CBA) and their salaries.  In any given case, “comparable” players may not have any more than one more year of experience than the player in question.  But for players in their first year of eligibility, there is a chain linking the free agent market to arbitration-e;igible players’ salaries.  Players comparable to 5 year players include first-year free agents, 5 year players are comparable to 4 year players, and and 4 (3) year players are comparable to 3 (2) year players.

When players just become eligible for free agency, the typical salary jumps.  According to data from 2001  gathered by Dan Marburger, the average salary jumped by approximately 150% while the average salary of 3 and 4 year players nearly doubles.  Since arbitrators may consider comparable salaries, the effects of the free agent market get passed down to arbitration eligibles.  an showed that just becoming eligible for arbitration drove the average salary of that class of players from just under $500,000 to nearly $1,200,000, about a 240% jump.

Posey is but one example.  He was set to get a big payday anyway had his case gone through the formal arbitration process.  Rather than go through the headaches of the process, Posey got his nice payday and now he has a pocketful of change.

Paying for Sports Programming

2013 January 19
by Skip Sauer

It is pretty widely understood that sports programming drives live television these days.   The Nielsen ratings for broadcast networks during the week of December 24 provide some recent data.  Nielsen’s table, reproduced below, shows that NFL broadcasts were the four most watched telecasts that week  (“The OT” is Fox’s NFL post-game show).

Prime Broadcast Network TV – United States
Week of December 24, 2012

Rank Program Network Rating Viewers (000)
3 OT, THE FOX 10.2 17,813
6 60 MINUTES CBS 6.5 10,265
7 NCIS 12/25-SP(S) CBS 6.1 9,836
8 TWO AND A HALF MEN CBS 5.7 8,621
9 NCIS: LOS ANGELES 12/25(S) CBS 5.4 8,622
10 ELEMENTARY CBS 5.2 8,055

Source: Nielsen. Primetime Broadcast Programs (source page, which is updated to current weekly ratings with a lag).

On cable and satellite the story is the same.  The top ten list for cable during the week of Dec. 24 is dominated by the much maligned college football bowl games.  Virginia Tech – Rutgers (ugh!) and and Duke – Cincinnati are among six bowl games on that week’s top ten list for cable.

Amidst this general background, consider the recent LA Times piece on the rising cost of sports programming, a trend which is expected to continue.  The main point of the piece is that when tv programming is served in a bundle, consumers who don’t like specific components of the bundle end up paying for a service they don’t consume.  Continued increases in the costs of sports programming threaten the sustainability of a pricing system that is allegedly already burdened with inequities, since consumers who don’t watch sports will presumably drop their subscriptions by the thousands.

The problem is that the main point of the piece is probably wrong.  At Marginal Revolution, Alex Tabarrok presents the simple arithmetic for a hypothetical bundle offered to consumers with differing tastes for sports and non-sports programming.  This is a neat example and exposition.  The bottom line:  each consumer gets what she pays for.

There are many hypothetical bundles however, so it is possible that a lack of perfect competition allows some combination of the leagues, networks, and carriers to set prices which subsidize those who watch (and provide) sports entertainment by selling bundles which extract consumer surplus from viewers who don’t watch sports.  My own personal experience is somewhat different.  I view with amazement the occasional offer of a low cost bundle of networks in the $40 range (ESPN included), alongside my monthly bill which is north of $100.  On close inspection, the difference is revealed:  a la carte consumption of various sports channels!  I wonder if my base package is subsiding viewers of Masterpiece Theater.

The simplistic alternative offered to bundling is a la carte pricing, across the board:  choose whatever combination of tv networks, individually priced, that you want!  This is a durable proposal, often recycled but rarely implemented.  There is probably a reason for this.  As Tom Hazlett has pointedly argued, it is telling that we don’t see very much a la carte in cellphone pricing, internet service, satellite radio, or on the ski slopes.  Market power is not pervasive, and across many markets we find consumers opting for, rather than out of bundles when given the choice.  There are efficient reasons for this.  Hazlett’s 2006 article in the J. of Telecommunication and High Technology Law, “Shedding Tiers for A La Carte” explains why.

It is possible that continued increases in the value of sports programming among aficionados would shift some sports packages out of the basic tier bundle, for the same reason that caviar is never offered as a free topping on a hamburger.  Non-sports viewers would then have no complaint.   At that point the howling would come from fans unwilling to pay the market price for sports.

Sunk Costs and Sports Personnel Decisions

2013 January 18
by Phil Miller

James Surowiecki writing about Mark Sanchez at the New Yorker:

After a farcical 2012 season, in which the New York Jets invented ever new ways to lose games (thus the “butt fumble”), the team’s general manager, offensive coördinator, and quarterback coach are all gone. Yet Mark Sanchez, the starting quarterback, remains. He has played poorly for two seasons in a row, and has now thrown more interceptions in his career than touchdowns. But the Jets have invested an enormous amount of energy and money in Sanchez, and, assuming that no one will trade for him, they are contracted to pay him $8.25 million next year, whether he plays or not. So figuring out what to do with Sanchez will be trickier than you might think.

The Jets have stumbled into a classic economic dilemma, known as the sunk-cost effect. In a purely rational world, Sanchez’s guaranteed salary would be irrelevant to the decision of whether or not to start him (since the Jets have to pay it either way).

Here and here are two definitions of sunk costs, both of which IMHO don’t go far enough because they only consider past costs sunk.  Generally speaking, I think Surowiecki has it more accurately.  A cost is sunk if it cannot be avoided.  Whether the cost has already been paid is irrelevant.  What matters is can it be avoided if a different choice is made.  With guaranteed money committed to a player, whether that player sees the field in meaningful duty, that money is essentially gone/kaput/sunk.

Why then would franchises play players based on supposedly sunk costs?  For one, there is the desire not to waste.

Hal Arkes, a psychologist at Ohio State University who has spent much of his career studying the subject, explains, “Abandoning a project that you’ve invested a lot in feels like you’ve wasted everything, and waste is something we’re told to avoid.” This means that we often end up sticking with something when we’d be better off cutting our losses—sitting through a bad movie, say, just because we’ve paid for the ticket. In business and government, the effect pushes people to throw good money after bad.

Surowiecki notes that the more someone has invested in a project, the greater the belief that it will work out for the best.  If you wonder why your struggling team stays with it’s high draft pick when there is a competent back up already on the team, this may be why.

Then there is the concern for reputation.

“Giving up on a project, though, means that somebody has to admit that he shouldn’t have done it in the first place,” Arkes says. “And there are lots of executives who would rather be tortured than admit that they’re wrong.”

This reason is interesting because it suggests that by going through with a decision, the person is avoiding an expected reputational hit.  Even if the costs are sunk, the hit to the reputation is not.  Depending on the circumstances, sticking to one’s guns may be fully rational.

Manti Teo and the MSSM (Mainstream Sports Media)

2013 January 17
by Phil Miller

No doubt you’ve ran across the bizarre saga of Notre Dame linebacker Manti Teo and his fictional girlfriend.  If not, see here.

The fact that Deadspin broke this story and not one of the legacy sports media, like ESPN or Sports Illustrated, is also a bit bizarre to me.  With their legions of staff, why did it take so long for the story to come out and why at Deadspin?  No offense to the folks at Deadspin, but I expect more out of the major sports media.

The political analogy I thought of was the John Edwards story which the MSM declined to investigate and which was finally broken by The National Enquirer.  In that case the reason why the MSM did not poke around in Mr. Edward’s business was political, but what explains the inaction of the MSSM in the Teo saga?

Viking Stadium Money Running Short of Projections

2013 January 17
by Phil Miller

The State of Minnesota had hoped that new electronic gambling machines would provide the necessary revenue to pay for the state’s share of building a new stadium for the NFL’s Vikings.  Those funds are (unexpectedly!) are not materializing.

Tax revenue from those games is supposed to fund the state’s $348 million share of the $975 million Vikings stadium slated for downtown Minneapolis. But the tax revenue from the games, which started to become available in September, fell short of projections by about half through the end of 2012: While $35.2 million was projected to come in, the games returned only $17.2 million in tax revenue.

We’ll have to keep an eye on this to see if things pick up or not.  Various people with a skin in the game are preaching patience, and that may be all that’s needed.  But if not, what does the government do if reality continues to fall short of projections?

The Will to Make Tough, But Correct Decisions: Harbaugh and McCarthy

2013 January 14
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by Brian Goff

Related to the prior post on managerial decision making, Jim Harbaugh has finally won over almost all his critics for his decision to hand the starting QB job to Colin Kaepernick as Jim Trotter from discusses.  For me, the most interesting part of this is Harbaugh’s willingness to flout conventional thinking and management his resources.  Replacing your winning QB with an young and untested QB is the kind of thinking that will get media and former players screaming if it doesn’t work out, just like going (and failing) for 4th down on your own 30 yard line.  Just ask Bill Belichick.

Whether the decision goes their way or not, Harbaugh and Belichick are coaching based on the evidence (practice and game observation in Kaepernick’s case and analytics in Belichick’s fourth down case).  For most coaches, it is a combination of the evidence plus what others will say and think (or, put equivalently, what is conventional). Taking the conventional route may be wrong, but it doesn’t generate the howling of an analytical but unconventional move.

The 49er game is a case in point.  Mike McCarthy chose to punt the ball back to the 49ers down by 14 and facing 4 and 5 at the Green Bay 49 yard line, yes, and the fact that the Packers had already given up 38 points.  This analytically dubious decision has barely made a ripple in the media.  (Advanced NFL Stats has a calculator that shows it to be favorable to go and it doesn’t even factor in the above average porous defense for the Pack).  Instead, Pete Carroll’s decision to go for it on 4th and 1 in the second quarter of the Seahawks-Falcons game has attracted much more attention, although analytically correct as ANS discusses.