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

Gregory Gay

OverviewWritten by Brian

SoebbingDiscussion

Competitive BalanceAISDRUOHCreate a model which

determines if fans are sensitive to competitive imbalance and team performance

Competitive BalanceThe degree of balance among teams

Standard Deviation of Winning Percentage (SDWP)Examines the dispersion of win percent within an entire

league for a seasonLimited due to the number of games in a season

AISDRActual to Idealized Standard Deviation Ratio

Created to counter the SDWP limitation

AISDR for a league is .500/√GG # of games in a season

The closer the ratio is to 1 the better the competitive balance

UOHUncertainty of Outcome

HypothesisThe 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

The Empirical Model

I = teams t = seasons u=explanatory termÔ = a fixed effect parameter for each team

Summary Statistics

Regression Results

ResultsModel covers only 67% of the variation

Variables such as market population, market income, and ticket prices

These variables are difficult to accurately calculateAISDR is negative and significant

Confirms UOHFans are sensitive to league-wide performance

Games behind a playoff berth variable is negative and significantFans are sensitive to individual team performance

Conclusion

Using results can help MLB policy makers create an optimal match between competitive balance and team performanceMaximizes attendance

My ThoughtsQuestions?