This chapter focused on the baseball production function in general and the
measurement of technical efficiency in particular. We found little difference in
the efficiency indices generated by the two alternative techniques used in this
paper. Using the stochastic model, the efficiency estimates indicate that the
Oakland Athletics were the most efficiently managed team from 1982 to 1993.
They were also the most consistent team in their efficiency as indicated by the
lowest standard deviation (0.011). The New York Yankees rated a close second
to Oakland in both efficiency (second highest mean index) and consistency
(second lowest standard deviation). Certainly Sandy Alderson and George
Steinbrenner have very different reputations, but by our measures they have both
produced superior management for their teams.
A useful discussion of the alternative approaches is contained in
Lovell ( 1993).
Alternatively, minimum absolute deviation estimation can be employed. The error
term from the least square regression has mean zero and hence is two-sided. The
assumption that all deviations represent inefficiency suggests that the error term is one-
sided. This inconsistency can be resolved by adjusting the intercept term so that all error
terms are one-sided. For a further discussion, see
Greene ( 1993).
There are some differences between the rankings. For example, the Minnesota
Twins rank 16th in the stochastic model, but only 22nd in the deterministic model.
We would argue that the stochastic frontier is conceptually superior because it
allows statistical noise. The ability to decompose the error, however, requires restrictive
assumptions. If these assumptions are not valid, the deterministic approach may produce
better estimates. The results from our model suggest little difference in the two
Note that the designated hitter rule in the American League could lead to different
league production frontiers. To check for different frontiers, a league dummy was
included in the regression. The coefficient was statistically insignificant, which suggests
that the American and National League teams face the same technology.
Questia, a part of Gale, Cengage Learning. www.questia.com
Book title: Baseball Economics:Current Research.
Contributors: John Fizel - Editor, Elizabeth Gustafson - Editor, Lawrence Hadley - Editor.
Publisher: Praeger Publishers.
Place of publication: Westport, CT.
Publication year: 1996.
Page number: 200.
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