Parity in Professional Sports – How Salary Caps Affect Competitive Balance
Open Access
Author:
Marzano, Frankie
Area of Honors:
Economics
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
John M Brauer, Thesis Supervisor Nima Haghpanah, Thesis Honors Advisor Bee Yan Roberts, Faculty Reader
Keywords:
Sports competitive balance nhl nfl mlb nba basketball hockey football baseball professional sports salary cap revenue sharing luxury tax
Abstract:
What keeps fans watching sports night after night, season after season? Competitive balance. Part of the fun for the average fan watching sports is not knowing what is going to happen or what team will win. If the best team won its respective championship every single year, sports would not be worth watching. Competitive balance is what keeps fans engaged even when the odds are stacked against a particular team. Now, the NHL, NFL, NBA, and MLB have utilized their own policies to increase competitive balance, and none is more popular than implementing a salary cap. This effectively acts as a price ceiling for teams to spend on their payrolls, ensuring that teams in small markets can compete with teams in big markets that have more resources, like New York or Los Angeles, for example. But, it is not a given that salary caps automatically improve competitive balance. This thesis develops on prior research to assess whether salary caps influence competitive balance in the NHL, NFL, NBA, and MLB by using Brad R. Humphreys’ Competitive Balance Ratio as the primary method to measure parity in each league.
