Term Paper on "Competitive Balance"

Term Paper 4 pages (1367 words) Sources: 0

[EXCERPT] . . . .

Competitive Balance

Sanderson, Allen R. & John J. Siegfried. "Thinking about Competitive Balance."

Journal of Sports Economics. 2003. 4: 255-279

Thinking about Competitive Balance" by Allen R. Sanderson and John J. Siegfried in the Journal of Sports Economics is a timely reminder of the economic difficulties of the business of baseball, just as the season begins to hit the American airwaves 'full swing.' Although the famous football coach Vince Lombardi observed that in sports 'winning isn't just everything, it's the only thing,' this spirit of cutthroat competition is only of interest to spectators if the competitors are fairly equal in ability. Watching the sports equivalent of a bloodbath is dull, and until this year it was one of the reasons that many viewers turned off the SuperBowl with a yawn, as one heroically overmatched team pummeled one heroically untested team.

The relative aspects of demand and quality of competition" looms large in sports, in other words the competitive edge or ability of one team cannot be understood in isolation (Sanderson & Siegfried, 2003, p. 256). "In cases when consumer demand depends, to a large extent, on inter-team competition and rivalry, the necessary interactions across 'firms' (i.e., teams) define the special nature of sports. Contests between poorly matched competitors would eventually cause fan interest to wane and industry revenues to fall" (Sanderson & Siegfried, 2003, p. 256). Player autonomy, a lack of salary caps, and high bidding for high-quality players at the highest price have driven up the cost of doing business in baseball but also reduced the competitive field. This unfairly tilts the hand of the major franchises, like the Yankees, in creating winning teams.

The need to maintain competition in sports stands in contrast to other competitive, for-profit industries, where, for example, consumers do not buy more Pepsi because of the war between Coke and Pepsi. Baseball teams have an interest in keeping neck-and-neck competitive games alive, but competing product brands do not have an interest in fueling the competition in the marketplace, rather they wish to maintain dominance alone. Consumers may like price wars that drive prices down, corporations usually do not, except in sports, where the hatred of the fans or star players of a rival team can boost attendance and ticket prices.

The need for competition why most sports have certain controls within their structure to limit one individual or team dominating competitors: "Boxing segments fighters into weight classes and employs rankings and ladders to create bouts with equally matched opponents. Auto racing, track competitions, and swimming use qualifying times to ensure competitive fields. Tennis produces seedings based on previous performances in the expectation that the strong will play the strong in later round matches. Claiming races in thoroughbred racing is a mechanism designed to have horses of approximately equal ability entered into the same event" (Sanderson & Siegfried, 2003, p. 258).

Although the authors cite limitations on the use of performance-enhancing drugs in their 2003 article as one further method of limiting some individuals gaining a huge advantage over others, clearly this mechanism has failed in baseball. Instead, the main controls are the splits between home and away games, an extended playoff series rather than a single winner-take-all contest. "The more evenly matched two opponents are, the higher the probability that a random element -- a poor call by an official, a bad bounce, a key injury, or pure luck -- will determine the outcome. Thus, the premise that the demand for games is greater" (Sanderson & Siegfried, 2003, p. 260).

The authors note that the league itself also creates some intentional imbalances to level the playing field and the fact that winning conditions create more winning conditions (i.e. The most talented players want to gravitate to the most popular, 'winning-est' teams), These include "reverse-order draft systems, various attempts to constrain players' salaries, revenue sharing" (Sanderson & Siegfried, 2003, p. 268). Some sports leagues have luxury taxes on top heavy teams as well (Sanderson & Siegfried, 2003, p. 268-269). "Lengthening a series reduces the probability that the weaker opponent will win; increasing the number of playoff rounds and… READ MORE

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