IDLab Workshop

Egor Ivanov presented the study "Exploring the Priorities of US Professional Leagues - Profit or Victory?". Co-authors of this research: Petr Parshakov and Dennis Coate

This study delves into the historical dichotomy between North American and European sports clubs, aiming to understand their underlying objectives. While previous research has primarily focused on European football clubs, this study investigates the profit maximization assumption in North American sports. Leveraging methodologies from prior works, the analysis draws on revenue and winning percentage functions, estimating coefficients and team-specific effects to examine the implications of profit maximization versus winning percentage maximization.

 

Data from Forbes valuations of professional sports franchises, along with performance records from league websites, form the basis of the analysis, covering the period from 2003 to 2023. The findings reveal intriguing disparities across leagues. Notably, team fixed effects demonstrate statistical significance across all leagues, yet determinants of revenue and winning percentage vary. While winning percentage significantly influences revenue in MLB, NHL, and NBA, it lacks significance in NFL and MLS. Similarly, expenditure impacts winning percentages differently across leagues.

 

Ultimately, the comparison of predicted and actual winning percentages suggests that NFL and MLB franchises operate as entities focused on maximizing wins. This study offers valuable insights into the behavior of North American sports clubs, shedding light on their motivations and decision-making processes.