Measuring Market Power in Professional Baseball, Basketball, Football and Hockey

Healy, Gerald T.,, Jing Ru Tan and Peter Orazem

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: Forbes Magazine estimates of annual revenues, costs and team values for professional sports teams are used to derive market power measures for teams in four major professional sports leagues: the MLB, NBA, NHL, and the NFL. Two variants of the Lerner Index, one that reflects short-term operations for the past year and another reflecting the long-run net present value of the franchise are derived over the 2006-2016 period. Only the long-run measure provides estimates that are always consistent with theoretical requirements. Analysis of variance of long-run market power shows that local market factors and past team performance have less impact on market power than common league-wide effects. Team market power depends least on local team effects in leagues that have stronger revenue sharing policies. Price-cost margins are higher for professional teams in North American than for the most valuable European soccer teams, consistent with the stronger exemption from anti-trust law in the U.S.

Date: 2017-08-10
New Economics Papers: this item is included in nep-com, nep-cul, nep-ind and nep-spo
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Related works:
Journal Article: Measuring Market Power in Professional Baseball, Basketball, Football, and Hockey (2020)
Working Paper: Measuring Market Power in Professional Baseball, Basketball, Football, and Hockey (2020)
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