"...Freakonomics meets ESPN." —Alan Schwarz, author, The Numbers Game Taking Measure of the Many Myths in Modern Sport David Berri, Martin Schmidt, and Stacey Brook
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Home Chapter Excerpts Detailed Table of Contents Preface Excerpt Chapter 1 Excerpt Chapter 2 Excerpt Chapter 3 Excerpt Chapter 4 Excerpt Chapter 5 Excerpt Chapter 6 Excerpt Chapter 7 Excerpt Chapter 8 Excerpt Chapter 9 Excerpt Chapter 10 Excerpt	Chapter Three: Can You Buy the Fan’s Love from Size of Payrolls is not Equal to Size of Markets, pp. 37-38 The story told by the Blue Ribbon Panel is that teams in larger markets have an advantage in baseball. How did the panel measure market size? The choice of metrics was size of payroll. This seems to be an odd choice. Market size is typically a reference to the number of people in a specific geographic area. New York City is considered a larger market than Milwaukee because more people live in and around New York City. Likewise, Milwaukee is a small market because of a relative lack of people living in and around Milwaukee. Implicitly the Blue Ribbon Panel appeared to be arguing that market size, defined in terms of population, should be linked to payrolls. Basically the sequence works as follows: Teams located in larger markets like New York and Los Angeles have a larger potential fan base. Consequently, these teams can both attract more fans, and because stadiums have a finite size, possibly charge higher ticket prices for the relatively scarce tickets the teams sell. Such larger markets can also be used to secure greater broadcast revenues. Each of these events leads to more revenue, and these greater revenues allow a team to afford larger payrolls. If larger payrolls are used to acquire better players, then there should be a clear link between payrolls and wins. We will examine the link between wins and payroll momentarily. For now, let’s consider the link between market size, measured traditionally with population, and wins. Our analysis requires some context. So before we examine baseball in the post–1994–95 strike era, let’s first consider three alternative data sets: The NFL from 1995 to 2004, the NBA from 1995 to 2004, and Major League Baseball from 1985 to 1994. With data in hand we examined the link between population and wins for each sport. Specifically, we simply regressed each team’s average regular season winning percentage across the noted time periods upon the population in each team’s host city. The results indicate that population and wins in each data set are not statistically related. Market size, as it is classically defined, does not determine winning percentage in each of these three data sets. When we examined the post–1994–95 strike era in Major League Baseball, a different result was uncovered. Although the level of significance was relatively low, population could be said to be statistically significant after 1995 in baseball. The model, though, only explained 11% of wins. So population alone does not explain much of the variation of wins. Beyond the issue of how much, there appears to be one outlier in the post strike data set. Our finding of a statistically significant link between wins and population appears to depend entirely on the New York Yankees. If the Yankees are dropped from the sample the statistical relationship between wins and population vanishes. Excerpts (c) 2006 by the Board of Trustees of the Leland Stanford Jr. University. No further use, reproduction or distribution of this material is allowed without the written permission of the publisher. Chapter Four Excerpt