Baseball Economics: Current Research

By John Fizel; Elizabeth Gustafson et al. | Go to book overview

CONCLUSIONS

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.


NOTES
1.
A useful discussion of the alternative approaches is contained in Lovell ( 1993).
2.
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).
3.
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.
4.
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 approaches.
5.
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.

-200-

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