Abstract
In this chapter, we extend the analysis by analyzing the cost efficiency of MLB teams. We apply the corrected DEA model introduced in Chap. 3 to analyze the relationship between team wins and team payroll. One of the concerns for competitive balance is the ability of large market teams to spend higher amounts to lure the better players. In 2009, the New York Yankees had a total payroll above $200 million, over $50 million above the second-place New York Mets. The median team payroll was only $80 million. Large market teams are able to generate more local revenue from attendance, advertising, television and radio fees, etc. In 2006, a new revenue sharing program was agreed upon to restore competitive balance; teams contribute approximately one third of their local revenue into a pool and the money is split among the teams.
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Notes
- 1.
Jose Canseco was brought to the New York Yankees in 2000 to prevent other teams, especially the Boston Red Sox from playing him. See Canseco (2005).
- 2.
Hal Steinbrenner wrote an opinion in a September 2006 Sporting News against revenue sharing, claiming it is socialist and anti-American.
- 3.
It is possible that the constraints lead to infeasibility for the variable returns to scale model; see Fig. 4.3 and the associated discussion in Wilson (1995). In this chapter, we adopt the procedure used by Wilson to handle infeasible projections.
- 4.
After eliminating outliers, it is not possible to estimate minimum costs for wins less than 59, the lowest number of wins of the frontier defining seven teams.
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Ruggiero, J. (2011). Measuring Cost Efficiency. In: Frontiers in Major League Baseball. Sports Economics, Management and Policy, vol 1. Springer, New York, NY. https://doi.org/10.1007/978-1-4419-0831-5_4
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DOI: https://doi.org/10.1007/978-1-4419-0831-5_4
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