Competition within a Cartel: League Conduct and Team Conduct in the Market for Baseball Player Services

Profit‐maximizing Gate Revenue Sharing in Sports Leagues

“…It simply serves as an illustration of the variety of papers found in this literature. Ferguson, Jones, and Stewart (2000) focus on the implementation of salary restrictions in MLB. Coates, Humphreys, and Zhou (2014), for example, argue that competitive balance has less impact on demand for stadium seating than previously expected.…”

“…Palomino and Sakovics (2004) and Peeters (2012) look at the design of sharing rules for media rights revenues. Ferguson, Jones, and Stewart (2000) focus on the implementation of salary restrictions in MLB. Within this strand of literature, the articles by Atkinson, Stanley, and Tschirhart (1988), Késenne (2007), and Salaga, Ostfeld, and Winfree (2014) are most closely related to mine.…”

Antitrust Analysis of Sports Leagues

“…Ferguson, Jones, and Stewart (2000) observe that teams, "through the medium of the league, jointly promulgate rules that determine, in general, interteam behavior and, more specifically, the amount of output to be produced (number of games), all entry conditions, the negotiation and disposition of all national media contracts, interteam revenue sharing, and the basic conditions of player employment," whereas each team simultaneously "is explicitly recognized as a spatial monopolist, setting its own output prices, negotiating local stadium and media contracts, and dealing with players within the general limits set by league-wide rules." (p. 422) They argue that Major League Baseball acts as a cartel in setting rules that restrict teams' willingness to pay for players and impose costs on the transfer of players between teams, but within the cartel, each MLB team acts like a price-taker in the market for player services.…”

“…Haupert (2003) Several other studies compare the period of MLB owner collusion to the period either before or after the collusion. For example, Ferguson, Jones, and Stewart (2000) estimate a hedonic model of team salaries using data for the period 1986-91 and test the hypothesis of a common hedonic price vector. In other words, they test whether teams paid the same "price" for the same team characteristics, such as total years of major league experience by all players, team slugging average for the current season multiplied by the number of hitters, the ratio of strikeouts to walks for all pitchers during the current season multiplied by the number of pitchers, and the number of 'star' players on the team.…”

Media revenue sharing as a coordination device in sports leagues

“…Several earlier contributions have examined aspects of cartel behavior in sports. Examples include a study by Ferguson et al (2000) in the context of Major League Baseball, an article by Forrest et al (2004) with regard to English Premier League soccer, and research by Kahn (2007) on college sports. The possible use of revenue sharing as an incentive device was first highlighted by Atkinson et al (1988) in an analysis of the National Football League.…”