Measuring Market Power in Professional Baseball, Basketball, Football, and Hockey. (October 2020)

• Record Type: Journal Article
• Authors: Healy, Gerald T.; Tan, Jing Ru; Orazem, Peter F.
• Is Part Of: American economist. Volume 65:Number 2(2020)
• Page Start: 214
• Page End: 231
• Publication Date: 2020-10
• Subjects: market power -- Lerner Index -- revenue sharing -- local markets -- price-cost margin -- antitrust; Economics -- Periodicals; Économie politique -- Périodiques; Economics; Electronic journals; Periodicals; 330.05
• DOI: 10.1177/0569434520941505
• Languages: English
• ISSNs: 0569-4345

Abstract

Using Forbes magazine's estimates of the current value and revenues of professional sports teams, we derive a long-run variant of the Lerner Index. We apply the strategy to professional teams in baseball, basketball, football, and hockey over the 2006–2019 period. All teams have positive and significant price-cost margins over the entire period. Analysis of variance shows that local market factors and past team performance have less impact on a team's market power than do common league-wide effects. The strongest market power is in leagues with more aggressive revenue sharing policies. Price-cost margins are higher for professional teams in North American than for the most valuable European soccer teams, consistent with the stronger exemption from antitrust law in the United States and the weaker revenue sharing policies in Europe. JEL Classifications : L43, L13, L83