Population and Bandwagon Effects on Local Team Revenues in Major League Baseball

Abstract

Panel models are used to estimate the determinants of local revenues in Major League Baseball. This article updates a previous study by Burger and Walters (2003) with additional data and panel techniques. Consistent with their results, this study finds that market size does matter as a determinant of team marginal revenues when using panel techniques. However, two important differences surface when estimating the bandwagon effect. First, performing well in the postseason is much more important to marginal revenues than having a good regular-season win—loss record. Second, there are spillover effects associated with postseason wins, implying that misspecification arises in models where performance and revenue are only contemporaneously related.

Keywords

local revenue function marginal revenue product free agency competitive balance

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