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Gregory Gay

Competitive Balance and Attendance in Major League Baseball: An Empirical Test of the Uncertainty of Outcome Hypothesis. Gregory Gay. Overview. Written by Brian Soebbing. Discussion Competitive Balance AISDR UOH

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Gregory Gay

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  1. Competitive Balance and Attendance in Major League Baseball: An Empirical Test of the Uncertainty of Outcome Hypothesis Gregory Gay

  2. Overview • Written by Brian Soebbing • Discussion • Competitive Balance • AISDR • UOH • Create a model which determines if fans are sensitive to competitive imbalance and team performance

  3. Competitive Balance • The degree of balance among teams • Standard Deviation of Winning Percentage (SDWP) • Examines the dispersion of win percent within an entire league for a season • Limited due to the number of games in a season

  4. AISDR • Actual to Idealized Standard Deviation Ratio • Created to counter the SDWP limitation • AISDR for a league is .500/√G • G # of games in a season • The closer the ratio is to 1 the better the competitive balance

  5. UOH • Uncertainty of Outcome Hypothesis • The more even team abilities are, the less certain the game’s outcome • Therefore a greater attendance is expected • The number of games behind the leader is one of the best measurements of demand • Attendance is greater for the home team in close games • As a result the probability of a home team winning is positive and significant

  6. The Empirical Model • I = teams t = seasons u=explanatory term • Ô = a fixed effect parameter for each team

  7. Summary Statistics

  8. Regression Results

  9. Results • Model covers only 67% of the variation • Variables such as market population, market income, and ticket prices • These variables are difficult to accurately calculate • AISDR is negative and significant • Confirms UOH • Fans are sensitive to league-wide performance • Games behind a playoff berth variable is negative and significant • Fans are sensitive to individual team performance

  10. Conclusion • Using results can help MLB policy makers create an optimal match between competitive balance and team performance • Maximizes attendance

  11. My ThoughtsQuestions?

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