Summary: Competitive Balance In Professional Sports

The first studies on competitive balance in professional sports date back to 1956 to the work of Rottengberg who first discussed a method to analyze the equilibrium in the MLB by counting the number of pennants won by teams in their leagues. In 1971 El-Hodiri and Quirk began to question the effects of the introduction of the various policies and the changes of the structures on the competitive balance in the various professional sports. This question rose after finding out that if a league is left to run its own harmony, it will not lead towards a perfect competitive balance. Vrooman (2009) proceeded with studying the effects of the decision of the NBA not to impose a Hard Cap but to spread the benefits that large market teams make to the small

Sanderson and Siegfried supported the work of Rodney Fort highlighting the necessity of having an uncertain league and maintaining the highest level of competitive balance in order to preserve the fans interest, since consumers are not interested to attend games in which the results can be easily determined beforehand. Recently, Berri and Schmidt (2004) found out that the NBA has a very low level of competitive balance and it has the lowest level of it out of the major sport leagues. This result will be supported by the findings of this paper too. The effect of the introduction of the salary cap on the competitive has been investigated by Kesenne (2000) who, using a simple model based on two teams, concluded that the CB is positively affected but owners have to overspend on talent by raising the contracts of the players. Zimbalist (2010) instead, focused his attention on the collective Bargaining Agreement, considering the NFL hard cap as the model to follow to sustain the competitive balance, but he believed that the NBA’s soft cap system has the power to overcome some of the CB problems, but he wasn’t able to support his

Berri, Martin B. Schmidt, and Stacey L. Brook (2006) and published in their book “wages of wins”, in which they analyze many myths in modern sport. They found out that the NBA is the least balanced league out of the four most famous North American sport leagues (NFL, MLB, NBA and NHL), a result which is on line with the findings of this paper. Competitive balance has been analyzed by many authors, since there is a common thought that if there is a persistent inequality among teams in a league, the wealthier teams will be able to outspend the less wealthy ones, acquiring all the valuable free agents, worsening even more the balance in the league. Some studies run by David Berri (2006) though, shown how fans are attracted by the uncertainty of the outcome of a game, therefore if a team has the possibility to win most of the games and the outcome is almost certain, attendance will decrease. This allows a league to be more balanced, since managers have an interest in bringing the most fans to the game, allowing other teams to sign valuable free agents