Academic journal article Atlantic Economic Journal

# Pay and Performance in the National Hockey League, 2011-2012

Academic journal article Atlantic Economic Journal

# Pay and Performance in the National Hockey League, 2011-2012

## Article excerpt

JEL L83

Economists have produced numerous estimates of the value of baseball players (see, for example, Scully, G.W. (1974), Pay and Performance in Major League Baseball, American Economic Review, 64(5), 915-930) and basketball players (see, for example, Berri, D.J., Schmidt, M., and Brook, S. (2006). The Wages of Wins). Scant attention has been given to measuring the marginal revenue products (MRPs) of professional hockey players. We propose to estimate the MRPs of National Hockey League (NHL) players (24 forwards and 12 defensemen) who participated in the 2012 All-Star game.

The two-equation recursive model calculates the effect of player performance on team winning and the effect of team winning on team revenue. The model presented here is based on 2010-11 and 2011-12 data (the last two full seasons) covering a cross-section of 30 teams (15 each in the Eastern and Western Conference). Performance statistics are from www.hockey-reference.com; team revenues are from www.forbes.com; and population figures are from www.bea.gov (Table CA1-3) and www.statcan.gc.ca (Table 1.1-1).

Equation (1) relates POINTS (two for a win, one for an overtime or shootout loss, and zero for a regulation loss) to a number of team performance variables. SCORING denotes a team's goals plus assists divided by the conference average number of goals and assists per team. GA is the number of goals allowed by a team divided by the corresponding conference team average. (Both SCORING and GA are therefore measures of strength relative to other teams in the same conference.) OUT is equal to one for teams that were 20 or more points out of the last playoff spot (eighth place in each conference). The results are (t-statistics in parentheses):

(1) [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII]

Equation (2) expresses team REVENUE (in millions of dollars) as a function of market characteristics. POP is the population (in millions) of the metropolitan statistical area (MSA) in which the team belongs; NEW equals one for new venues (built within the last five years); CAN equals one for Canadian teams; and TWOTM equals one if there are two (or more) professional hockey teams in the same MSA. …

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