The theoretical premise of this research can be traced back to seminal studies of economist’s Simon Rottenberg (1956) and Walter Neale (1964), who both noted the importance of uncertainty of outcome in attracting spectators to live sporting events. In examining the economics of sport leagues, both researchers came upon this “the uncertainty of outcome hypothesis” (UOH), which is the general premise that fans would rather see a contest in which teams are evenly paired with one another in terms of talent and strength. Stemming from the UOH, came the idea of competitive balance, the concept that there is a relative level of equality in on-field strength between teams in a league (Forrest & Simmons, 2002). Key questions which arise from this literature include: “In what manner can competitive balance be measured?” and “Is competitive balance a significant factor in determining fan attendance at sporting events?”
In order to tackle these issues, along with the prior stated research questions, this dissertation research uses a two-fold approach to investigating competitive balance. Within the literature on competitive balance, there are a great number of metrics which have been developed, however researchers remain divided among which metric(s) are the best. With this in mind, this dissertation approaches this problem by the creation of a new competitive balance metric, the Dynamic Competitive Balance Ratio (DCBR). This metric, which is evolved from prior metrics (Humphreys, 2002), is special in that it allows for a different measure for each team in every time period, and its length can be adjusted for any time period larger than a single season. Thus, through the creation of this metric, this dissertation research attempts to further the competitive balance research through the creation of a new metric in order to correct for several existing issues among current competitive balance metrics.
In the second part of this dissertation, the DCBR is included as part of an economic demand model to estimate fan demand for attending MLB games from 1980 till the present. In order to do this, a regression model is utilized to estimate results from the panel data set, with proper econometric corrections made to take into account a variety of issues which may arise such as: heteroskedasticity, autocorrelation, the use of fixed or random effects, and so forth. Because of the lack of demand studies in sport which have employed a competitive balance metric as part of the model, through construction and estimation of results, this dissertation provides an important extension of the theoretical understanding of competitive balance by giving further evidence of what effect competitive balance has on a consumer’s choice to attend sporting events.
Analysis of the estimated results also provide a more robust picture of the factors which attract (or deter) consumers from choosing to attend MLB games in person, which in turn presents better information for sport managers to understand why fans come to sporting events. Such findings can be directly translated into better decision making in sport management, by informing administrators, owners, and managers as to what factors attract fans to sporting events, as well as the importance of having competitive balance in these sport leagues. It is thus, that this research examines the significance of competitive balance from a variety of levels. From this, it is evidenced that this dissertation research presents a number of contributions, in terms of theoretical knowledge, empirical understanding, as well as practical application of competitive balance and the demand for attendance at sporting events, and thus providing an overall improvement of sport for fans, owners, managers, and other related stakeholders.