On the Evolution of Competitive Balance: The Impact of an Increasing Global Search

Abstract

The Coase theorem maintains that where free‐market precepts exist, the allocation of property rights does not impact the distribution of resources. An application to Major League Baseball suggests that institutions such as free agency and the reverse‐order amateur draft would not impact player distributions and therefore would not impact competitive balance. The present study finds that the distribution of wins is generally consistent with the precepts of the Coase theorem and therefore suggests a course for those who wish to alter the level of competitive balance: Major League Baseball should increase its focus on expanding the size of its labor pool. (JEL O15 , L83 , C22 )