The Short Supply of Tall People: Competitive Imbalance and the National Basketball Association
Berri, David J., Brook, Stacey L., Frick, Bernd, Fenn, Aju J., Vicente-Mayoral, Roberto, Journal of Economic Issues
In recent years a wealth of literature has been offered examining the economics of professional team sports. Much of this work follows in the neoclassical tradition, employing the standard assumptions and focusing primarily on the impact of individual decision making. The purpose of this work is to show that the blinders imposed by the narrow focus of the neoclassical tradition on the issue of competitive imbalance may alter the conclusions that a broader view suggests.
Economists from the time of Adam Smith have trumpeted the virtues of competition. From the perspective of individual firms, though, profits are typically increased when competition is eliminated. However, in professional sports, the elimination of competition effectively removes the primary source of revenue. In the words of Walter Neale, "Pure monopoly is a disaster. [Former heavy-weight champion] Joe Louis would have had no one to fight and therefore no income" (1964, 2).
The analysis of Neale extends beyond the obvious case of the boxing champion to any professional sport. As noted by Mohamed El-Hodiri and James Quirk (1971, 1306), "[t]he essential economic fact concerning professional team sports is that gate receipts depend crucially on the uncertainty of outcome of the games played within the league. As the probability of either team winning approaches 1, gate receipts fall substantially. Consequently, every team has an economic motive for not becoming "too" superior in playing talent compared with other teams in the league."
Following the above-cited works, one could conclude that an important element of the economic success of a professional sport is the reduction of competitive imbalance. (1) Whenever one competitor reaches a level of dominance where uncertainty of outcome has been compromised, the demand for the output of this industry is expected to decline. Such a result has been noted empirically by Glenn Knowles, Keith Sherony, and Haupert (1992) and by Daniel Rascher (1999). Each of these authors noted that fan attendance in Major League Baseball is maximized when the probability of the home team winning is approximately 0.6. If the home team has a higher probability of finding success, one can expect fan attendance to decline. Consequently, given the importance of fan attendance to a league's financial success, leagues are expected to implement rules and institutions designed to address the relative strength of combatants on the field of play.
The focus of the literature exploring sports and competitive imbalance is often upon the variety of institutions individual leagues have enacted to improve the distribution of wins within the league. These include the reserve clause, the rookie draft, revenue sharing, and payroll caps. (2) The presumption behind the enactment of each of these institutions is that the level of competition is a factor within the reach of league policy.
Much of this literature focuses upon the investigation of competitive imbalance in a single sport, such as baseball or basketball. If one adopts a broader view, though, the picture one paints differs from much of this prior work. We will begin our "painting" with an analysis of competitive imbalance across a wide array of professional team sports. This will be followed by a discussion of the causes of competitive imbalance, a discussion that will lean heavily upon the works of evolutionary biologist Stephen Jay Gould. From our discussion of Gould we will turn to the specific case of professional basketball. This discussion will center upon the supposed "short supply of tall people," a factor that we believe drives the persistent level of competitive imbalance found in the NBA.
Measuring Competitive Imbalance
To explore the level of competitive imbalance across a variety of professional team sports we require a measure of the dispersion of wins in a league that allows intersport comparisons. (3) As noted, most studies have focused upon one sport. …