By Brian M. Mills
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ECONOMIC AND HISTORICAL PERSPECTIVES ON STATIONARITY, STRUCTURAL CHANGE AND THE UNCERTAINTY OF OUTCOME HYPOTHESIS IN LONG-TERM NORTH AMERICAN PROFESSIONAL SPORTS ATTENDANCE by Brian M. Mills A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy (Kinesiology) in The University of Michigan 2012 Doctoral Committee: Professor Rodney D. Fort, Chair Professor Scott E. Masten Professor Mark S. Rosentraub Assistant Professor Kathryn L. Heinze © Brian M. Mills ----------------------------------------------------------------------------------------------- 2012 I would like to dedicate this work to my beautiful wife, Caitlin, for her support throughout the research and writing process. Reaching this milestone would have been in serious doubt without her presence every step of the way. ii ACKNOWLEDGEMENTS I would like to begin by thanking my adviser, Dr. Rodney Fort, for mentoring me during my time at the University of Michigan. In addition, I thank the rest of my dissertation committee—Dr. Mark Rosentraub, Dr. Scott Masten and Dr. Kathryn Heinze—for their time and invaluable input at the many stages of this project. I would also like to thank Dr. Young Hoon Lee—who graciously provided statistical programming expertise throughout this entire dissertation—and Dr. Jason Winfree, who put up with incessant ramblings about econometric issues within this work and beyond. Input from Dr. Richard Wolfe was pivotal in starting my career as a graduate student at the University of Michigan, and I appreciate his willingness to go the extra mile to personally assist me in the process. Finally, I would like to thank my fellow graduate students for our constant discussions about sports, economics, management and just life in general during the graduate school process. My experiences in Ann Arbor will be taken with me wherever I go. iii TABLE OF CONTENTS DEDICATION................................................................................................................... ii ACKNOWLEDGEMENTS ............................................................................................ iii LIST OF TABLES .......................................................................................................... vii LIST OF FIGURES ....................................................................................................... viii LIST OF APPENDICES ...................................................................................................x LIST OF ABBREVIATIONS AND ACRONYMS ....................................................... xi ABSTRACT .................................................................................................................... xiv CHAPTER 1: INTRODUCTION .....................................................................................1 1.1 BACKGROUND, OBJECTIVES AND OVERVIEW OF RELEVANT LITERATURE ...................... 1 1.2 A BRIEF DESCRIPTION OF THE NORTH AMERICAN SPORTS LEAGUE .............................. 5 1.3 FAN PREFERENCES IN PROFESSIONAL SPORT ................................................................ 11 1.4 FORMAL MODELING OF THE NORTH AMERICAN PROFESSIONAL SPORTS LEAGUE ...... 14 1.5 OWNERS’ DEFENSE OF LEAGUE POLICIES AND THE INVARIANCE PRINCIPLE .............. 19 1.5.1 LEAGUE POLICIES AND THE INVARIANCE PRINCIPLE ............................................... 22 1.5.2 GATE REVENUE SHARING AND COMPETITIVE BALANCE ........................................... 25 1.5.3 SALARY (PAYROLL) CAPS, LUXURY TAXES AND COMPETITIVE BALANCE .................. 29 CHAPTER 2: TIME SERIES ANALYSIS IN PROFESSIONAL SPORT ................38 2.1 INTRODUCTION ................................................................................................................ 38 2.2 PRELIMINARY TREATMENT AND RECENT ADVANCES ..................................................... 39 2.3 ATTENDANCE SERIES AS STATIONARY PROCESSES ......................................................... 42 2.4 STRUCTURAL CHANGE AND DEMAND FOR ATTENDANCE ............................................... 45 CHAPTER 3: GENERAL METHODOLOGY .............................................................50 3.1 PREDICTOR VARIABLES AND MEASUREMENT ISSUES..................................................... 50 3.2 FURTHER ECONOMETRIC ISSUES .................................................................................... 57 CHAPTER 4: NBA, NFL AND NHL LEAGUE AGGREGATES ..............................59 4.1 INTRODUCTION ................................................................................................................ 59 4.3 UNIT ROOT RESULTS ....................................................................................................... 62 4.4 THE BP METHOD AND STRUCTURAL CHANGE IN ATTENDANCE .................................... 63 4.5 THE BP METHOD AND GU, PU, AND CSU ...................................................................... 66 4.6 LEAGUE HISTORIES AND STRUCTURAL CHANGE ............................................................ 69 4.7 ECONOMIC SIGNIFICANCE OF OUTCOME UNCERTAINTY ............................................... 72 4.8 SUMMARY AND CONCLUSIONS ......................................................................................... 74 CHAPTER 5: MAJOR LEAGUE BASEBALL FRANCHISES .................................92 5.1 BACKGROUND ................................................................................................................... 92 5.2 DATA AND METHODS ....................................................................................................... 93 5.3 UNIT ROOT RESULTS ....................................................................................................... 96 iv 5.4 BREAKPOINT ANALYSIS AND UNCERTAINTY OF OUTCOME RESULTS ............................. 98 5.5 BREAKPOINT REGRESSION RESULTS ............................................................................. 109 5.5.1 BALTIMORE ORIOLES ............................................................................................ 110 5.5.2 BOSTON RED SOX ................................................................................................. 110 5.5.3 CHICAGO CUBS..................................................................................................... 111 5.5.4 CHICAGO WHITE SOX ........................................................................................... 112 5.5.5 CINCINNATI REDS ................................................................................................. 113 5.5.6 CLEVELAND INDIANS ............................................................................................. 114 5.5.7 DETROIT TIGERS ................................................................................................... 115 5.5.8 HOUSTON ASTROS ................................................................................................. 116 5.5.9 LOS ANGELES DODGERS ....................................................................................... 116 5.5.10 MILWAUKEE BREWERS ........................................................................................ 117 5.5.11 NEW YORK METS ................................................................................................ 118 5.5.12 OAKLAND ATHLETICS .......................................................................................... 118 5.5.13 PHILADELPHIA PHILLIES ..................................................................................... 119 5.5.14 PITTSBURGH PIRATES ......................................................................................... 119 5.5.15 SAN FRANCISCO GIANTS ...................................................................................... 120 5.5.16 ST. LOUIS CARDINALS ......................................................................................... 121 5.6 SUMMARY AND CONCLUSIONS ....................................................................................... 122 CHAPTER 6: NATIONAL BASKETBALL ASSOCIATION FRANCHISES .......154 6.1 JUSTIFICATION ............................................................................................................... 154 6.2 DATA AND METHODS ..................................................................................................... 155 6.3 UNIT ROOT RESULTS ..................................................................................................... 156 6.4 UNCERTAINTY OF OUTCOME RESULTS .......................................................................... 157 6.5 BREAKPOINT REGRESSION RESULTS ............................................................................. 158 6.5.1 ATLANTA HAWKS ................................................................................................... 159 6.5.2 BOSTON CELTICS .................................................................................................. 159 6.5.3 CLEVELAND CAVALIERS ........................................................................................ 160 6.5.4 DETROIT PISTONS ................................................................................................. 160 6.5.5 NEW YORK KNICKS ............................................................................................... 160 6.5.6 PHILADELPHIA 76ERS ........................................................................................... 161 6.5.7 PHOENIX SUNS ...................................................................................................... 161 6.5.8