Competitive Balance Sanderson, Allen R.

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 the percentage of teams eligible for a championship reduces the chances that the best team will capture the championship" (Sanderson & Siegfried, 2003, p. 272). However, the authors do not include a counterbalance to such arguments -- longer seasons also can result in viewer attrition of interest, the competition from other sports beginning while the season sprawls on, and the anger of fans if they feel that their team has been unfairly treated by new rules.

The authors do acknowledge there are also psychological facilitators of interest in sports besides win-loss competition, and could have treated this critical issue with greater depth. The hope that the underdog will triumph can create a psychological perception of competition that occasionally, as in the case of the recent SuperBowl between the undefeated New England Patriots and the New York Giants, is substantiated in fact, especially in the selective memory of sports fans (Sanderson & Siegfried, 2003, p. 261). The local desire to have a winning team and fan loyalty will also factor into the success of creating a popular if not a winning team, as can player preferences for certain teams (Sanderson & Siegfried, 2003, p. 263). Some communities may be welcoming of sports facilities within their midst, just as some fans are more tolerant of losing or winning all of the time, depending on their relationship with a team or player. These feelings may exist, regardless of the season's competitive nature.

Another problem with attempting to institute controls upon the system is the volatile nature of any competitive balance no matter how monopolistic, given the short career spans of even the most durable athletes and the fluidity of team membership. Controls that work in one market may not be necessary, or work against competition, ten years later. The authors view baseball as a fixed industry, much like the auto industry, for all of their stress on the special nature of its competition They also seem to overstate their case: "Of the many contemporary controversies in baseball -- ticket prices, owners' financial losses, contentious labor-management disputes, the level and rate of growth of players' salaries, among others -- the one that has arguably received the most attention recently is the alleged lack of competitive balance. It was the principal focus of the commissioner's BRR -- front and center with regard to proposed provisions of the 2002 collective bargaining agreement -- and is a constant theme with the press, public, and economists writing about baseball" (Sanderson & Siegfried, 2003, p. 273).