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Freedom of Entry, Market Size, and Competitive Outcome: Evidence from English Soccer
Author(s) -
Buraimo Babatunde,
Forrest David,
Simmons Robert
Publication year - 2007
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.2007.tb00834.x
Subject(s) - league , football , competition (biology) , revenue , population , allowance (engineering) , market size , panel data , population size , empirical evidence , outcome (game theory) , empirical research , test (biology) , marketing , sports economics , economics , business , political science , microeconomics , econometrics , sociology , international economics , accounting , operations management , demography , philosophy , law , ecology , biology , paleontology , epistemology , physics , astronomy
A primary prediction of the theory of sports leagues is that teams with higher revenues will have higher league positions or winning percentages than teams with smaller revenues. Behind this prediction lies the key influence of market size, yet this has been underexplored in the empirical literature on sports leagues. This paper combines detailed census of population data with panel data on team performance for an open sports league, the English Football League, to test the hypothesis that market size matters for team performance. We find a particularly important role for population close to the team's location. The impact of local population is reduced but not eliminated when allowance is made for entry in the form of competition from neighboring clubs. We assess implications of these findings for both European and North American sports league structures.