Labor Market Theory: Inefficiencies In Professional Sports

614 Words2 Pages
bulb-icon

Recommended: Sabermetrics baseball statistics

Economic Theory Labor market theory is one of the most integral economic theories needed to dissect the inefficiencies in professional sports. Looking first at the type of market these leagues function in, one can see that they do not necessarily meet all the criteria that a competitive market requires. The big four sports leagues in the US have a set number of teams which creates barriers for entry. Only when an expansion is agreed upon by the league, such as NHL has done for the upcoming season, are teams allowed to enter, and even then, it is limited to a maximum of a few teams in recent history. Additionally, the league makes it virtually impossible to exit, as selling of a team is the closest they come to exiting the market. Through As in typical labor markets, employees are valued by the marginal revenue of production they add to their firm, or in the case of professional sports, their team. Determining player’s MRP becomes an easier process than in the labor markets of other industries due to the availability of statistics of player’s and their contribution to their team’s success. The difficulty of this process lies in the determination of how revenues for a team are produced. As previously mentioned Paul DePodesta, an analyst from the Oakland Athletics was on the foreground of this type of analysis in the MLB. His discovery of the correlation of winning percentage and team revenues was just the starting point. His methodology of his model building was briefly touched on before, but it started with running regression analysis on a series of different typical baseball statistics, and continued with his finding of On Base Percentage and Slugging Percentage being the stats that correlated closest with winning percentage, and the implementation of the AVM systems models outputting player’s expected run values. MLB’s regression analysis on player’s MRP to a team is some of the most sophisticated in professional sports, with other leagues and teams starting to catch on and attempting to create their own models of MRP for their respective leagues. By taking the labor market theory and MRP of players and analyzing how they interact with wage determination and competitive balance mechanisms we can make an economic analysis of the labor market inefficiencies. Giving us the ability to make some determinations on why labor market inefficiencies exist in professional sports and how/if there are any ways to correct for

Show More
Related

  • MLB Salary Cap Is Needed

    1758 Words  | 4 Pages

    Anyone who has been involved in an organized sport, whether it is backyard football or a high school sports team, knows that these sports all have organizations that are responsible for setting rules, determining conditions of play, and penalizing individuals who infringe the rules. Some of the organizations like the National Football league and the MLB are familiar to most people, the rules they follow are not generally understood by anyone who is not closely associated with the sport. Most fans and sport critics assume that what is happening inside these organizations are of little concern to them. However, this is not the case. In the MLB, the New York Yankees spend an excessive amount of money every year to obtain big name players. A luxury tax was put into effect for teams that go over the spending limit. However, the Yankees are the only team that pays the tax because they are the only team that exceeds the spending limit. The players, coaches, fans, and I have argued that a salary cap would be the best possible way to allow teams in the Major Leagues an equal opportunity getting to the World Series.

    Read More

  • Major League Baseball Salaries and the Economic Effect Competition and the Consumer

    4700 Words  | 10 Pages

    As long has there has been business, Management and Labor have warred against each other for a bigger piece of the pie. Major League Baseball is no different. In the early years of professional baseball the owners controlled the salaries of the players and decided where they could play and what they would be paid. The players were bound to their team by the Reserve Clause that stated, the services of a player will be reserved exclusively for that team for the next season. This resulted in keeping the player’s salaries artificially low because the players were not allowed to offer their services to any other team. The Reserve Clause was in effect for more than One Hundred years of baseball history. It was challenged several times but the owners had won every time, until in 1970 when the St. Louis Cardinals traded outfielder Curt Flood to the Philadelphia Phillies. Flood refused to play for the Phillies and sued to become a free-agent. Flood’s case was in court for several years going all the way to the Supreme Court. He was never able to play in the Major League again. While he did not win his case, he laid the groundwork for a later case that involved two pitchers, Andy Messersmith and Dave McNally who filed a grievance against the league contending that, because they didn't sign contracts with their previous teams they were free agents. The owners and the Players Association agreed to submit to binding, impartial, arbitration in order to settle this case. On December 23, 1975 the arbitrator Peter Seitz ruled in favor of the players and the Reserve Clause was broken, and the era of free agency began in the Major Leagues. In 1976 when free agency began the average player salary was only $52 thousand dollars, but it has increased steadily ever since. By 1990 the average salary for a Major League Baseball player had risen to $589 thousand dollars. This Year baseball will start the 2001 season with an average player salary of more than $2 million, about 40 times higher than the typical wage in 1976 when free agency began.

    Read More

  • Sabermetrics: Advanced Statistics in Baseball

    1868 Words  | 4 Pages

    Baseball statistics are meant to be a representation of a player’s talent. Since baseball’s inception around the mid-19th century, statistics have been used to interpret the talent level of any given player, however, the statistics that have been traditionally used to define talent are often times misleading. At a fundamental level, baseball, like any game, is about winning. To win games, teams have to score runs; to score runs, players have to get on base any way they can. All the while, the pitcher and the defense are supposed to prevent runs from scoring. As simplistic as this view sounds, the statistics being used to evaluate individual players were extremely flawed. In an attempt to develop more specific, objective forms of statistical analysis, the idea of Sabermetrics was born. Bill James, a man who never played or coached professional baseball, is often credited as a pioneer in the field and for coining the name as homage to the Society of American Baseball Research, or SABR. Eventually, the use of Sabermetrics became widespread in the Major Leagues, the first team being the Oakland Athletics, as depicted in Moneyball. Bill James and other baseball statisticians have developed various methods of evaluating a player performance that allow for a more objective view of the game, broadly defined as Sabermetrics.

    Read More

  • Professional Sports Teams Move - Cities Fight To Keep Them

    1040 Words  | 3 Pages

    Professional sports, like most of our popular culture, can be understood only partly by through its exiting plays and tremendous athletes. Baseball and football most of all are not only games anymore but also hardcore businesses. As businesses, sports leagues can be as conniving, deceitful, and manipulative as any other businesses in the world. No matter what the circumstances are, it seems that Politicians are always some how right around the corner from the world of sports. These Politicians look to exploit both the cultural and the economic dimensions of the sports for their own purposes. This is what is known in the sports industry as “playing the field”.

    Read More

  • Who's To Blame For Athletes Salaries Analysis

    270 Words  | 1 Pages

    In the article,”Opinion: Who's to blame for athletes' salaries? We are”, the author proves that the reason why the wages of athletes are skyrocket high is that us, the viewers make it that way. The author proves this by stating that fans buy team merchandise, which increases athlete's wages. The author also believes that many people have pieces of team merchandise which they love to wear, and furthermore, some teams even create products that fit babies, including bibs and pacifiers, like the Washington Redskins. Another point is that since millions of fans watch the professional athletes play every game, the money that the athletes make comes from the money that the media pays. What this means is that the media companies first buy the permission

    Read More

  • Why the NFL and MLB Should Have the Same Drafting Process

    723 Words  | 2 Pages

    Most do not think of the challenges that one faces when trying to join a major league sport. The players’ must all work hard, and really want the opportunity in order to achieve their goals. One has to make sure that they do not waste their time if they really do not want that position on a major team. The NFL and MLB drafts have many flaws; however, they have great similarities that influence people to like one or the other. The drafts should be the same because every single person wants the same opportunity that another person gets.

    Read More

  • Personal Statement: Why College Athletes Should Be Paid

    564 Words  | 2 Pages

    Example one is that it would be different for each sports to fit the needs of the number of players like golf cap would be different from football. Secondly put salary caps so one collage can't pay one player more than another collage so players are not influenced by the amount of money. Lastly "minimum salary could be $25,000 per player in each sport. This would obviously not make the athletes rich, but it would give them enough to live like typical college students." (Nocera).

    Read More

  • Sports Stadiums: Turning Public Money into Private Profit

    3640 Words  | 8 Pages

    Noll, Roger, and Zimbalist, Andrew.  Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums. Brooking institutions press, Summer 1997. Vol. 15 No. 3.

    Read More

  • The Business of Soccer in America

    1386 Words  | 3 Pages

    Soccer (Football) is said to be the world’s most popular sport in the world, USA are one the few countries where soccer isn't the main sport. The beautiful game is a game of passion; fans coming together to form a ‘religion’ but all this fun and excitement come down to money. The football business is one that generates a great deal of revenue from betting to tickets, TV and shirts sponsorship and transfer deals. You can argue it’s the richest sport in the world. Here in America we are late boomers to the soccer craze, which is why our league isn't as strong as other like the Barclays Premier League, LA LIGA, Ligue 1, Bundesliga, Serie A etc. In the year 1996, MLS was founded and the association was not favorably disposed to by the general public. As time went by, more Americans accepted and grew interest in sport. The Major League Soccer and United States Soccer Association (USSA) have since had hard time attracting revenue due to numerous problems.

    Read More

  • Basketball Needs To Be Fixed

    1329 Words  | 3 Pages

    The problem with this is the inflation of players' salaries. When players are drafted young, they demand to be paid what they want; teams pay them millions right out of college.

    Read More

  • Math Is An Influential Part Of Baseball Essay

    1672 Words  | 4 Pages

    The type of data that will be collected throughout this paper will be from Major League baseball from over the past years. There are various types of data for each part of the game, such as hitting and pitching statistics. Applied to that data will be the mathematical formulas and calculations that will help get us the end statistics that are so important to the game and they will show overall how math is an influential part of the game.

    Read More

  • College Sports - Slavery and the NCAA

    3437 Words  | 7 Pages

    Abstract:  Collegiate athletes participating in the two revenue sports (football, men's basketball) sacrifice their time, education, and risk physical harm for their respected programs. The players are controlled by a governing body (NCAA) that dictates when they can show up to work, and when they cannot show up for work. They are restricted from making any substantial financial gains outside of their sports arena. These athletes receive no compensation for their efforts, while others prosper from their abilities. The athletes participating in the two revenue sports of college athletics, football and men's basketball should be compensated for their time, dedication, and work put forth in their respected sports.

    Read More

  • Wage Discrimination In Sports

    528 Words  | 2 Pages

    People would think that over the years that our country would have settle the inequality of equal pay between men and women. In sports we come to find out a different feeling that no matter how good the team maybe are how many World Cups have been won there is still statments about being treating unfair. I feel no matter what gender you are if you’re good enough to make a team that represents the World Cup there shouldn’t be any issue.

    Read More

  • Advertising in Sports

    776 Words  | 2 Pages

    While sports for the spectators are merely entertainment, the economics of the industry are what drives businesses to become involved. Sports have become more of a business entity rather than an entertainment industry due to the strong economic perception of the over all industry. There are several instances in which economics may contribute to the effect on the sports industry, such as: the success of a team, the price of a ticket, the amount of money an athlete will make, and the amount of profit a team will make. The success of an...

    Read More

  • The Role of Economics in Sports

    5002 Words  | 11 Pages

    A young boy goes up to his mother and says, "Mommy! I want to be a baseball player!" If this was said in 1930, the boy's mother probably would have told the boy, "That's not future for you! You need to get a real job and make good money." If this was said in 1999, the boy's mother probably would have said, "Let's go to the store and buy you a baseball glove so you can start to practice." It is visible to every sports fan that in the past few decades, sports has undergone a whole new renovation. It isn't just an activity that is played for fun. It is a business in which owner and players attempt to coincide. It is a business where TV controls fan interest. It is also a business that affects many people's lives, both monetary and living aspects. There are many aspects that are involved with the economics of sport. Each one having unique qualities that adds to the greatest source of entertainment.

    Read More

More about Labor Market Theory: Inefficiencies In Professional Sports

Open Document