Game over? Assessing the impact of the emergence of a profitable wagering strategy in major league baseball wagering markets

Testing the impact of profitable investment strategies is often hampered by the practical difficulties of determining who knew what, and when. This study examines the impact of the publication of a profitable wagering strategy on the Major League Baseball wagering market. While standard measures of market efficiency characterized the Major League Baseball win–loss moneyline market to be efficient, previous works shows that wagering on underdogs early in the season can generate persistent profits. Though the overall efficiency of the baseball wagering market remained after publication, these profitable opportunities dissipated. Bettor behaviour is found to play varying roles across different wagering strategies; up to half of the drop in returns can be attributed to wagering market participant behaviour.     

REVENUE, POPULATION, AND COMPETITIVE BALANCE IN MAJOR LEAGUE BASEBALL

This article examines the impact of hometown market size on competitive balance in Major League Baseball. We use a four-equation simultaneous model of win percent, team payroll, team total revenue, and team local revenue in order to avoid simultaneity bias in the estimates. Using two-stage least squares, our results show that consolidated metropolitan statistical area population does have a statistically significant positive impact on local revenue. This leads to increased payroll, which has a significantly positive, but small, impact on win percent. Specifically, the estimated impact of an additional one million in population ranges from 0.233 to 1.126 additional wins per season. ( JEL L38)     

The impact of payroll allocation has on winning in major league baseball

This article presents evidence that allocating additional payroll to specific positions is positively related to the overall success of a sample of Major League Baseball from 2011 through 2015. When examining the two subsamples of the group, American League versus National League, the results show that the management staff of teams from respective leagues would be well served to increase payroll to certain positions such as catching and pitching. Additionally, this article investigates the impact payroll allocation has on runs scored, runs against and attendance and finds some significant relationships.     

Major League Baseball 2015, What a Difference a Year Makes

An econometric analysis of the 2015 Major League Baseball season is conducted with respect to regular season victories. Results obtained confirm some, but not all, results reported in prior research. The importance of solid team pitching and offense is underscored. Similar to 2014, team defence did not vary sufficiently to play a statistically significant role in team victory differences. Outcomes for total payrolls and salary disparities differ substantially from prior seasons. History may serve as a guide to what occurs on the field, but it does not always replicate the patterns of bygone years. Parameter heterogeneity is substantial and argues against pooling sample data from season to season. From a strict econometric perspective, the results obtained indicate that panel methods should not be utilized to analyse wins data for Major League Baseball. Ultimately, 2015 represents another departure from the standard baseball norm.     

WHY ARE AMERICANS ADDICTED TO BASEBALL? AN EMPIRICAL ANALYSIS OF FANDOM IN KOREA AND THE UNITED STATES

Theories of rational addiction posit that certain habit-forming goods—characterized by an increasing marginal utility of consumption—generate predictable dynamic patterns of consumer behavior. It has been suggested that attendance at sporting events represents an example of such a good, as evidenced by the pricing strategies of commercial sports interests. In this essay, we provide new evidence in support of rational addiction for the case of Major League Baseball but fail to find such support in data from the Korean Professional Baseball League. We then review the scientific literature on sports fans from the perspective of human behavioral ecology and propose a theory of endogenous habit formation among sports fans that could explain our findings . ( JEL C32, D83, D87, D91, L83)     

TAX REVISIONS OF 2004 AND PRO SPORTS TEAM OWNERSHIP

Tax law revisions of 2004 altered the “roster depreciation allowance” enjoyed by pro sports team owners. Supporters claimed this would practically eliminate costly legal oversight by the IRS and, ultimately, increase owner tax bills. Government officials and leagues remained silent on team value impacts but outside analysts argued they would rise by 5%. We model this policy change and investigate it empirically. Supporters in Congress were absolutely correct that owner tax payments should increase but outside analysts underestimated team value increases by half. No wonder Major League Baseball and the National Football League favored the revision. (JEL D21, G38, H25, L83)     

Raising salary or redistributing it: A panel analysis of Major League Baseball

Using data in Major League Baseball (MLB), this article conducts Panel Granger Causality tests for teams' salary structures and corresponding performance. The results show that a reliable way to enhance performance is to compress salaries rather than to enlarge the payroll.     

A test of monopoly price dispersion under demand uncertainty

A test of the predictions of Dana’s (2001) model of monopoly price dispersion under demand uncertainty using ticket price data from Major League Baseball shows that ticket price dispersion changes systematically with demand uncertainty, verifying the predictions of the model.     

Scouts versus Stats: the impact of Moneyball on the Major League Baseball draft

Michael Lewis’ influential book Moneyball (2003) discusses several sources of inefficiency in the Major League Baseball (MLB) labour market; one of these being the failure of baseball scouts to place a draft premium on college players. We test this implication of the Moneyball thesis – the superiority of college players – by measuring the productivity of players who were drafted in the first round of five MLB drafts covering the years 1995–1999. Employing a variety of specifications, we find that the performance of college draft choices is no better than those of high school picks and argue that this is consistent with Hayek's (1944) work on the economics of information and his emphasis on the importance of localized knowledge. Additionally, we utilize data on the first three rounds of the MLB draft from 1965 to 2010 to test whether Lewis’ book had any impact on teams’ draft strategies. We find no significant structural change in the draft following the publication of Moneyball.     

Opportunistic shirking behaviour during unpaid overtime

We identify the presence of shirking by Major League Baseball umpires during indefinite unpaid overtime, as defined by extra innings. In the presence of new information about expected game length, umpires exert biases in ball and strike calls consistent with opportunistically reducing the likelihood of working additional time. General implications with respect to the effectiveness of salaried workers during unpaid overtime hours are discussed.     

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.     

Minimax after money-max: why major league baseball players do not follow optimal strategies

Using real-life sports data of Major League Baseball, this paper investigates whether professional players follow the minimax theorem in their strategies. Our empirical results using the 2010 regular-season data show that baseball players do not optimize their strategies: there is a significant difference in their payoffs across strategies, and the sequence of their strategy choices is predictable from their previous actions. Further analysis using individual salaries and key contract variables indicates that a higher salary has a positive impact on following minimax strategies in the regular season. By contrast, a longer contract decreases a player’s incentive to pursue optimal strategies in the postseason. These results have important implications for compensation practices in various fields.     

Prospective measures of competitive balance: application to money lines in major league baseball

This study examines competitive balance in Major League Baseball (MLB) by looking at the money lines for the games during the regular season. The assertion is that the closer the money lines are to indicating that each team has an equal chance of winning each game, the more competitive balance there is in the league. This study extends the model developed by Bowman et al. (2012), which used point spreads to assess competitive balance in the National Football League (NFL) and the National Basketball Association (NBA). In this study, money lines for the 1999–2011 seasons were used to develop several measures of competitive balance. The results indicate that competitive balance increased rather substantially during this period. A by-product of this research is to identify the most highly rated team and pitcher. In 2002, New York Yankees were the highest rated team and from the year 2000 Pedro Martinez was the highest rated pitcher.     

Competition in shared markets and Major League Baseball broadcast viewership

This work evaluates the cross-quality elasticity of related products in the context of local market Nielsen Local People Meter ratings of Major League Baseball (MLB) regular season broadcasts from 2010 through 2013 from six teams in three shared markets. We employ a fixed effects panel regression with multi-way error clustering, finding that fans exhibit nuanced behaviour related to the absolute quality and relative quality of the two local teams. Our estimates imply quality-related competition for viewership between teams in the face of large disparities in quality. However, when both teams are of high quality, viewership increased beyond what own-team success would predict alone for the competing team. The competitive effects are largely dominated by the spillover effects. These findings point to complementary effects of team success beyond own-team interest, and bring about an important nuance in the literature on market definition, competition and substitution in sport.     

Convergence and clustering in major league baseball: the haves and have nots?

There appear to be two distinct views on the level of competitive balance within Major League Baseball. One view, mostly associated with academics, is that competition is more equal today than it ever has been. The other view, mostly associated with the media and the industry, is that competition is far worse today. The present paper, borrowing from the literature on economic convergence, finds that both views are valid. More specifically, while competitive balance has continued to improve, the improvement has been such as to create distinct convergence clusters. A discussion of the composition of these clusters is offered in the text.     

Productive Efficiency and Salary Distribution: The Case of US Major League Baseball

Recent theoretical research suggests that a firm's salary structure can affect the firm's productivity. We investigate the relationship between payroll inequality and production using US Major League Baseball data. Employing panel data methods, this study finds that salary inequality has a significantly negative effect on team success. A general result is that team success in term of wins does not seem to be correlated with efficiency; specifically, some of the least successful teams are also some of the most efficient. In addition, salary inequality does not appear to be correlated with efficiency. Furthermore, revenues generated by teams are not necessarily correlated with team efficiency.     

The effects of labour strikes on consumer demand in professional sports: revisited

Previous research has concluded that the 1981 and 1994–1995 Major League Baseball (MLB) strikes have caused short-term losses in attendance but have not resulted in any long-term effects on attendance. While total attendance at MLB games following the 1994–1995 strike has recovered to its pre-strike levels, this has been done only through the construction of new stadiums at an unprecedented pace which cannot continue into the future. After accounting for stadium effects, average MLB baseball attendance has dropped significantly since the 1994–1995 strike.     

The Reverse Favourite–longshot Bias and Market Efficiency in Major League Baseball: An Update

Racetrack and sports betting markets have been researched extensively with respect to the question of market efficiency. In contrast to the consistently observed favourite–longshot bias found in racetrack betting markets, it has been shown that gamblers in the market for Major League Baseball games reveal the opposite behaviour. This paper updates the previous study with ten years of additional data for the 1990–99 seasons. The strength of the reverse favourite–longshot bias is virtually identical to the original paper. The result suggests that, contrary to most reported inefficiencies in gambling markets, this bias appears to be permanent.     

An empirical analysis of the 2014 Major League Baseball season

An econometric analysis of the 2014 Major League Baseball season is conducted with respect to regular season victories. Results obtained confirm many, but not all, results reported in prior research. The importance of solid team pitching and offence is underscored. Team defence did not vary sufficiently to play a statistically significant role in team victory differences. Outcomes for total payrolls and salary disparities differ substantially from prior seasons. History may serve as a guide to what occurs on the field, but it does not always replicate the patterns of bygone years. Ultimately, 2014 represents another departure from the standard baseball norm.