11/7/2012

WhatExactlyisSports
Economics?
JadrianWooten
PhDStudent

WhatisSportsEcon?
• WSU’scatalogdefinition:
– EconomicaspectsofAmericansports;fan
demand;advertising;teamoutputdecisions;
league/conferenceorganization;governmentand
sports.
• DennisCoates:
– Astudythatexaminessportusingincentivesand
objectivefunctionsortriestounderstand,explain,
orpredictchoicesinasportcontextissports
economics

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 11/7/2012

WhatisSportsEcon?
• HiringofcoachesandGMs
• Playerdraftsandcompetitivebalance
• Unionsandcollectivebargaining
• Themythofthe“HotHand”
• AretheCubscursed?
• Race&nationalityinsports
• Population’seffectonwinning

WhatisSportsEcon
• Handsofprojects:
– Summer– “Howtobuildabaseballteamfrom
scratch”
– Spring– “Howtobuildabasketballschedule
aroundhomecourtadvantage”
• Mygoalfortheclass:
– Stopthinkinglikefansandstartthinkinglike
economists

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WhatResearchisDoneinSportsEcon?

• Theeffectsofpostseasonsoncompetitive
b l
balance
• Fantasybaseball’seffectonbaseball
• AthleticScholarshipsandcollegefootball
• BiasamongNBAcoaches
• Firingacoach&itseffectonperformance
ii h & i ff f
• Televisiondemandforcitieswithoutpro
teams

WhatSportsareCoveredUnderSports
Econ?
• NBA • College wrestling • Olympics
• MLB b k tb ll •
basketball Tennis • Worldcup
• NFL • College • Cricket • Badminton
• NHL hockey • Rugby • MMA
• MLS • Internation • Bowling • Archery
alsoccer
al soccer
• MLL • Golf • Cycling
• Champions
• College league • College • Skiing
football soccer
• Sumo

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TheEffectsofaRankedNationalism
Approach on Measuring Salary
ApproachonMeasuringSalary
DiscrepanciesinMajorLeagueSoccer

JadrianWooten

ResearchQuestions
• $519,000– 11games,2goals,1assist,604
i t 23 ld 1 i MLS
minutes,23yearsold,1yearinMLS
– USAcitizen
• $554,333– 32games,8goals,1assist,2,860
minutes,34yearsold,9yearsinMLS
– Grenadacitizen
Grenada citizen

• Whydothesetwopeoplemakedifferent
salaries?Isittheage,skill,nationality,or
somethingelse?

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WhatPeopleHaveSaidBefore
• Nationalitydoesn’tmatter
• Nationalitydoesmatter
• Payforperformanceistheanswer

• Problem?
– Fewhaveconsiderednationalitypastcontinent
– Someonlydoforeignvs.domestic

WhyMajorLeagueSoccer
• DifferentthantraditionEuropeanLeagues
• Internationallydiverse
• Consideredadevelopmentleague
• Salariesarepublicknowledge
• Firmsoperateasmonopoliesforsoccerinthe
majorityofcities
j i f ii
• Theleagueofficecontrolsplayercosts(kind
of)

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FirmsasMonopolies

MLSintheNews
• TorontoStar,October28,2012
– “LeagueSource”

“Whentheleaguetalkstoclubsaboutsigning
(designatedplayers),aboutasignificantamountof
guaranteedmoney,theywanttomakesurethelong
termhealthoftheteamandtheleaguearetakeninto
consideration”

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MLSintheNews
“Onesuspectstwofactorsasidefromthe
fi i l A S di i M llb
financial.AsaScandinavian,Mellberg l
appeals
tononeofthesizeableethnicminoritiesMLS
covetsasfans;andalsothefactthatheisa
stoicaldefenderratherthanazigzagging
forward.”
Cathal Kelly,TorontoStar
October28,2012

Contribution
• Newmeasureofnationality,morespecific
• Subgroupsbasedwithinconfederation
• Wheredoesaplayer’snationalityrankinthe
worldrelativetoothercountries?

“Thephrase‘Braziliansoccerplayer’islikethephrases‘French
chef’or‘Tibetanmonk.’Thenationalityexpressesan
authority,aninnatevocationforthejob–whateverthe
naturalability.”
AlexBellos,authorofFutebol:TheBrazilianWayofLife

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What’saConfederation?

Contribution
• Allcountrieswithinacontinentarenotequal
• EnglishsoccerismuchdifferentthanBelarus
• TakeacountriesrankinMarch(Startofthe
season)
• Rankitrelativetoother’swithintheir
confederation
– TopHalf,Third,orFourthofeachConfederation

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Contribution
• MorespecificthanDomesticvs.Foreign
• Morespecificthancontinentalaggregation
• Moregeneralthanindividualcountry
dummies
– Greatlyreducesaccuracy
– Influencedbyoutliers(DavidBeckham)
Influenced by outliers (David Beckham)

TheoryonDiscrimination
• Becker(1971)describesthreedifferenttypes
f di i i ti
ofdiscrimination
– Ownerdiscrimination
– Customerdiscrimination
– Employeediscrimination
• For
Foracompetitivefirm,onlycustomer
a competitive firm, only customer
discriminationcanremain

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DiscriminationPresent
• Ifownerspreferdomesticplayerstoforeign
l
players,or
• Ifownersbelievefanspreferdomesticplayers
toforeignplayers:

• Management
Managementiswillingtopayahigherprice
is willing to pay a higher price
perunitofdomestictalenthired
– Givenaleveloftalent,domesticplayersarepaid
more

TheModel

PLAYER Playercharacteristics
PERF PerformancemeasuresfromLY
SUPER p
SuperstarmeasuresfromLYandCY
NATION Nationalitymeasures
FX Team&Yearfixedeffects

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TheModel

• Age
• Age2
• MLSTenure
• MLSTenure
MLS T 2

• Positiondummies(Forward&Midfield)

TheModel

• GoalspergameLY
• AssistspergameLY
• MinutespergameLY
• #ofredandyellowcardsLY
# f d d ll d LY

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TheModel

• AllStarTeamLY
• MLSStartingXILY
• Dummyforanyexperiencewithnationalteam
• DesignatedPlayerforcurrentseason
D i t d Pl f t

TheModel

• TopHalfofConfederation
• TopThirdofConfederation
• TopQuarterofConfederation
• Top20teaminFIFA
T 20 t i FIFA
• Top10teaminFIFA

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TheModel

• Teamfixedeffectsfortheupcomingseason
• Yearfixedeffectsforsalaryyear

DataCollectionbytheNumbers
• 1,500+signedtocontractsin20092012(MLS
Pl U i )
PlayersUnion)
• 811recordedstatsinprev.season(MLSSite)
• 327domesticplayers(40%)
• 477foreignbornplayers(60%)
• 60countries
i
• 38DesignatedPlayers(over3seasons)

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CountriesRepresentedinSample

Hypothesis1
Fansand/orownershaveapreferencefor
d ti l f i l
domesticplayersoverforeignplayers:

Result
Overall,foreign(collective)anddomestic players
aren’tpaiddifferent
Canadians,Caribbean,Asians,Oceaniasuffer
AfricanandEuropeanbenefit

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Hypothesis2
Owners(andfans)prefertalentfrom“soccer
i h” ti “ ” ti
rich”countriesover“soccerpoor”countries.

• We’llexaminethisbyeachconfederation
• Samplesizeislargeenoughtoanalyze
–CONCACAF
CONCACAF
–UEFA
–CAF
–CONMEBOL

Hypothesis2
CONCACAF(NorthAmerica)
Playersinthetophalf,third,andquarterallmakemore
thantheir“lower”counterpart41%134%more

UEFA(Europe)
Onlythetopthirdmakemore(110%more)
Only the top third make more (110% more)
Theirstartingvaluesarethehighestamongall
groups

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Hypothesis2
CAF(Africa)
Neither tier makes more than the lower tier
Neithertiermakesmorethanthelowertier
Again,bigstartingspot,butnodifferencebetween
levels

CONMEBOL(SouthAmerica)
Thetopthirdandquartermake30%LESSthanthe
lowertier
Allareverysimilar,butitmaybeanegativesignalto
sendaBraziliantoMLS

Hypothesis3
Discriminationonlyoccursincertainquantiles of
th l
thesalaryrange.

Example:
Ifaclubwantstospend½milliondollars,they
maywanta marketable player
may want a “marketable” player
Ifthey’rejustfillingarosterspot,theydon’tcare

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Hypothesis3
Overall,rankhasnoeffectonsalarywhenwe
l k t it i til
lookatitinquantiles
Individualcontinentsdohavepremiumsand
discounts
SuperstarmeasuresREALLYmatteratthetop
levels(Whew!)
levels (Whew!)

Conclusions
• Wagepremiumsexistforcertainregions,as
ll f l i th t ti ithi
wellasforplayersinthetopcountrieswithin
theregions
• DifferentfromwhatK&M(2009)found
– 4moreteamsinthisstudy
– 3seasonsofdatavs
3 seasons of data vs 1season
1 season
• Eitherownersorfansarediscriminatingin
favorofplayersfrommorereputable
countries

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