Market Size Disparity Moderates Competitive Balance Interventions in US Sports Leagues

Kyle Davis (), Tyler Ransom (), Christopher Black () and Daniel Larson ()
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Kyle Davis: University of Oklahoma
Tyler Ransom: University of Oklahoma
Christopher Black: University of Oklahoma
Daniel Larson: University of Oklahoma

No 18491, IZA Discussion Papers from IZA Network @ LISER

Abstract: This study examines the extent to which market size disparity across franchises—measured as the coefficient of variation of MSA populations—moderates the effectiveness of competitive balance interventions (CBIs) in Major League Baseball (MLB), the National Football League (NFL), the National Basketball Association (NBA), and the National Hockey League (NHL) from 1967 to 2023. Using two-way fixed effects models with multiple balance measures, we find that CBI effectiveness depends on the distribution of market sizes across league members. Jointly adopting a salary cap and floor improves competitive balance at low levels of market size disparity but is ineffective at high levels. Revenue sharing shows limited effects. Luxury taxes are associated with worsened competitive balance in high-disparity leagues. Our findings demonstrate that market size disparity not only affects competitive balance directly but also determines which interventions succeed. These results have direct relevance to recent discourse on competitive balance in MLB.

Keywords: competitive balance; salary floor; salary cap; market size disparity; Major League Baseball (search for similar items in EconPapers)
JEL-codes: C23 D63 L11 L51 L83 (search for similar items in EconPapers)
Date: 2026-03
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