The data envelopment analysis technique is used to measure franchise payroll efficiency in the National Football League (NFL) from 1981 to 2000 and Major League Baseball (MLB) from 1985 to 2001. This article shows that there is a significant difference in the level of franchise inefficiency between MLB and the NFL because of the different financial structure in these leagues. MLB franchises, with little revenue sharing and no salary cap, tend to be less efficient than NFL franchises. Big spending and inefficient MLB franchises tend to come from large media markets, although this is not the case in the NFL. This article also shows that NFL franchise efficiency significantly improved after the salary cap was introduced in 1994.
Get full access to this article
View all access options for this article.
References
1.
Anderson, T. R.,& Sharp, G. P. (1997). Anewmeasure of baseball batters using DEA. Annals of Operations Research, 73, 141-155.
2.
Banker, R. D., Charnes, A., & Cooper, W. W. (1984). Some models for the estimation of technical and scale inefficiencies in data envelopment analysis. Management Science, 30, 1078-1092.
3.
Banker, R. D., Das, S.,& Datar, S. M. (1989). Analysis of cost variances for management control in hospitals. In J. L. Chan& J. M. Patton (Eds.), Research in governmental and nonprofit accounting(Vol. 5, pp. 269-291). Greenwich, CT: JAI.
4.
Banker, R. D.,& Johnston, H. (1994). Evaluating the impacts of operating strategies on efficiency in the U.S. airline industry. In A. Charnes, W. Cooper, A. Lewin, & L. Seiford (Eds.), Data envelopment analysis: Theory, methodology, and applications. Boston: Kluwer.
5.
Byrnes, P., & Valdmanis, V. (1994). Analyzing technical and allocative efficiency of hospitals. In A. Charnes, W. Cooper, A. Lewin, & L. Seiford (Eds.), Data envelopment analysis: Theory, methodology, and applications. Boston: Kluwer.
6.
Charnes, A., Cooper, W., Devine, D., Ruefli, T., & Thomas, D. (1989). Comparisons of DEA and existing ratio and regression systems for efficiency evaluation of regulated electric cooperatives in Texas. In J. L. Chan & J. M. Patton (Eds.), Research in governmental and nonprofit accounting(Vol. 5, pp. 187-210). Greenwich, CT: JAI.
7.
Charnes, A., Cooper, W.,& Rhodes, R. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research, 2, 429-444.
8.
Chilingerian, J. (1994). Exploring why some physicians’ hospital practices are more efficient: Taking DEAinside the hospital. In A. Charnes, W. Cooper, A. Lewin,& L. Seiford (Eds.), Data envelopment analysis: Theory, methodology, and applications. Boston: Kluwer.
9.
Cooper, W., Seiford, L., & Tone, K. (2000). Data envelopment analysis: A comprehensive text. Boston: Kluwer.
10.
Duberstein, M. J. (2002). NFL economics and salary information—A primer. Retrieved from www.nflpa.org
11.
El Hodiri, M.,& Quirk, J. (1971). An economic model of a professional sports league. Journal of Political Economy, 79, 1302-1319.
12.
El Hodiri, M., & Quirk, J. (1974). The economic theory of a professional sports league. In R. G. Noll (Ed.), Government and the sports business (pp. 33-80). Washington, DC: Brookings Institution.
13.
Fare, R., Grosskopf, S., Lindgren, B., & Roos, P. (1994). Productivity developments in Swedish hospitals: AMalmquist Output Index approach. In A. Charnes, W. Cooper, A. Lewin,& L. Seiford (Eds.), Data envelopment analysis: Theory, methodology, and applications. Boston: Kluwer.
14.
Fizel, J. L., & D’Itri, M. (1996). Estimating managerial efficiency: The case of college basketball coaches. Journal of Sport Management, 10, 435-445.
Fried, H., Lambrinos, J.,& Tyner, J. (In press). Evaluating the performance of professional golfers on the PGA, LPGA, and SPGA tours. European Journal of Operational Research.
17.
Hofler, R. A.,& Payne, J. E. (1997). Measuring efficiency in National Basketball Association. Economic Letters, 55, 293-299.
18.
Howard, L. W.,& Miller, J. L. (1993). Fair pay for fair play: Estimating pay equity in professional baseball with data envelopment analysis. Academy of Management Journal, 36, 882-894.
19.
Kahn, L. M. (1993). Managerial quality, team success, and individual player performance in Major League Baseball. Industrial and Labor Relations Review, 46, 531-547.
20.
Leeds, M., & von Allmen, P. (2002). The economics of sports. Reading, MA: Addison-Wesley.
21.
Mazur, M. (1994). Evaluating the relative efficiency of baseball players. In A. Charnes, W. Cooper, A. Lewin, & L. Seiford (Eds.), Data envelopment analysis: Theory, methodology, and applications. Boston: Kluwer.
22.
Neft, D., Cohen, R., & Korch, R. (1999). The pro football sports encyclopedia (1974-1998)(17th ed.). New York: St. Martin’s.
23.
Neft, D., Cohen, R., & Neft, M. (2001). The sports encyclopedia: Baseball. New York: St. Martin’s.
24.
Porter, P. K., & Scully, G. W. (1982). Measuring managerial efficiency: The case of baseball. Southern Economic Journal, 48, 642-650.
25.
Quirk, J.,& Fort, R. (1992). Pay dirt: The business of professional team sports. Princeton, NJ: Princeton University Press.
26.
Scully, G. W. (1994). Managerial efficiency and survivability in professional team sports. Managerial and Decision Economics, 15, 403-411.
27.
Seiford, L. M. (1996). Data envelopment analysis: The evolution of the state of the art (1978-1995). Journal of Productivity Analysis, 7, 99-137.
28.
Seiford, L. M., & Thrall, R. M. (1990). Recent developments in DEA: The mathematical programming approach to frontier estimation. Journal of Econometrics, 46, 7-38.
29.
Sheehan, R. G. (1996). Keeping score: The economics of big-time sports. South Bend, IN: Diamond Communications.
30.
Wang, C., Gopal, R. D.,& Zionts, S. (1997). Use of data envelopment analysis in assessing information technology impact on firm performance. Annals of Operations Research, 73, 191-213.
31.
Zech, C. E. (1981). An empirical estimation of a production function: The case of Major League Baseball. American Economist, 25, 19-23.
32.
Zimbalist, A. (1994). Baseball and billions: A probing look inside the big business of our national pastime. New York: Basic Books.
