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Samenvatting Sports Economics (FEB13092)
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Een samenvatting van alle colleges en benodigde papers van het vak Sports Economics.
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Lecture notes Sports Economics + summary of the papersSummary of the papers
Lecture 1:
Rottenberg (1956).The Baseball Players' Labor Market.
Each team in professional baseball has territorial rights, which means that each team monopolizes its
own territory and this is a marketable commodity. Until a player signs a contract with a team, the
player is a free agent and teams may compete in bidding for him. When bidding is heavy, the player
is paid a bonus for signing a particular contract. A free agent will also choose among alternative
bidders on the basis of his estimates of his lifetime earnings. When a players signs a contract, it must
be a uniform contract. This contract always contains a reserve clause, which permits the team to
renew the contract for the following year at price which the team may fix, subject to the constraint
that the salary in the next year is at least 75% of the salary the last year. This is only in the major
league. The player may not play baseball elsewhere than the team with which he signed the contract.
No team may negotiate with a player already under contract to another team (tampering). The
concurring team may negotiate with the team who has the player under contract.
There is a wide variation in attendance among the teams. The purpose of the reserve rule was to
achieve balance of playing strength among teams. But there seems to be some question whether this
rule was successful.
The draft or selection rule prevents a player from being held indefinitely in a lower classification
league if his services are wanted by a team of a higher classification. The waiver rule limits the
freedom of higher classification teams to dispose of their players to lower classification teams (major
league teams first have to ask the other teams in the major league(s) if they want to have the
particular player).
Salary information is not public. Minimum salary of 6000 per year.
In one sense, teams compete; in another they combine in a single firm in which the success of each
brand requires that it be not too much more efficient than the other.
Alternatives of reserve rule: divide the income equally to all clubs. But then there would be no
incentive to win for a team.
Conclusion: markets in which the freedom to buy and sell is constrained by the reserve rule or by the
suggested alternatives do not promise better results than do markets constructed on the postulate of
freedom. On welfare criteria, off course, the free market is superior to the others for in such a
market each worker receives the full value of their services and exploitation does not occur.
Szymanski (2003). The Economic Design of Sporting Contests.
Introduction: this paper is about design issues in sports. Designing an optimal contest is both a
matter of significant financial concern for the organizers, participating individuals and teams, and a
matter of consuming personal interest for millions of fans. The design of a sporting contest bears a
close relationship to the design of an auction. In this paper, they draw the distinction between
individualistic sports and team sports.
Conclusion: there has been a good deal of research that has direct implications for the design of
individualistic contests, empirical testing remains limited. The role of prizes in providing incentives
,has been largely ignored in the team sports literature. We are still some way from being able to fully
model and test an optimal design of a sporting contest.
Lecture 2:
Hakes & Sauer (2006). An Economic Evaluation of the Moneyball
Hypothesis.
The statistic that takes walk into account is the on-base percentage. The essence of the Moneyball
hypothesis is that the ability to get on base was undervalued in the baseball labor market. Only hits
were valued, but they didn’t take into account the ability to not get a foul. In the paper, they use
linear regression to prove that on base percentage is a powerful indicator of how much a batter
contributes to winning games.
If contribution to wins > contribution to salary undervalued skill.
In the table with the total attendance and seat prices, it becomes clear that the revenues of the A’s
were sensitive to performance: attendance increased sharply while average ticket prices rose as on-
field success improved.
Conclusion: the analysis of the paper supports the hypothesis that the baseball labor market was
inefficient. At first, the statistical analysis of for example bill James were ignored. The underpayment
of the ability to get on base was substantially if not completely eroded within a year of the
publication of Moneyball.
Szymanski (2000). A market test for discrimination.
The paper proposes a market test for racial discrimination in salary setting in English soccer league.
If some owners choose to discriminate:
Market demand minority talent < market demand white talent
Market price minority talent < market price white talent
More playing talent per euro spent on wage of minority players
Better ranking for clubs employing relatively more minority players = testable hypothesis
Market test: detect discrimination by underperformance of firms. So if clubs with an above average
percentage of black players systematically outperform other clubs after controlling for the wage bill,
we have discrimination.
Conclusion: racial discrimination increased over time. Statistically significant evidence of
discrimination is found. They also found that the proportion of black players did not significantly
affect revenues or attendance, so no evidence was found for fan discrimination.
Lecture 3:
Besters, van Ours, van Tuijl (2016). Effectiveness of In-Season Manager
Changes in English Premier League Football.
They analyse the performance of in season manager changes in English football. They find that some
changes are successful while others are counterproductive. On average, managerial changes do not
improve performance.
, Kahn and Szymanski argue that professional sports offer interesting data to analyse labor market
phenomena. One of the key decisions of the supervisory board is the hiring and firing of managers.
Many show that the decision to fire a manager is related to the difference between actual
performance and expectations.
In their analysis, the authors use the cumulative surprise, which is the sum of the differences
between the actual number of points and the expected number of points, as based on bookmaker
odds. Their main finding is that on average an in season replacement of the manager has no effect on
in season performances. They also find that some changes have positive and some changes have
negative effects.
Conclusion: managers are replaced for various reasons, but predominantly because of poor
performance. Successfulness of a manager replacement seems to be related to specific and highly
unpredictable circumstances. Deciding for a replacement and not have an improvement in results is
better than deciding not to act and not have an improvement.
Van Ours, van Tuijl (2016). In-season head-coach dismissals and the
performance of professional football teams.
In this paper they find that after the coach replacement, teams perform better than before. However
the performance is also better than before for a control group of coach replacements that did not
occur. Therefore they conclude that coach replacement does not improve team performance.
Professional football presents a fruitful soil for the analysis of major management changes. In the
paper, they investigate the reasons for in-season changes of the head coach of football teams in the
Netherlands. They find that the probability of an in-season change depends on the team
performance. They base performance on 2 things: the cumulative number of points in the previous
four matches and the cumulative surprise factor. They find no significant causal effect of coach
dismissal on team performance. That raises the question why clubs decide to fire a coach during a
season. They give 5 reasons for this:
1. Coach dismissals may be a response to the dissatisfaction of stakeholders/main
sponsors/holders of business seats/fans
2. Media may exert heavy pressure
3. Conflicts between coach and board/staff/players
4. Board may be subject to hot hand fallacy
5. Board can decide to sack a coach because doing something is better than doing nothing at all
Lecture 4:
Peeters & van Ours (2020). Seasonal home advantage in English
professional football.
They find that absolute home advantage is substantial. Clubs differ substantially in the relative home
advantage they enjoy. There is substantial decline in home advantage over time.
Home advantage correlates with stadium attendance and the use of artificial pitches. They finally
show that the quality of a team is related to the wages paid. They say that a higher budget pays a
double dividend; A higher budget allows a club to have a higher quality team, and as a result,
stadium attendance increases, which also has a positive effect on the home advantage.
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