Rejecting the Yankees-Red Sox model - do consumers like a level playing field?

This paper examines whether consumers like increased ‘variety’ in the marketplace using the market for sports as a means of studying this phenomenon. Periodically the Players Union and Sports League administrators (NBA, NFL, NHL, MLB) negotiate a new collective bargaining agreement that specifies constraints on how teams are able to spend money in constructing a team. This provides us with a setting in which the degree of competitiveness is decided exogenous of the consumers’ (paying public) preferences. We then use publicly available revenue data for teams to analyze the consumers’ response to the changes in degree of competition, represented by the nature of the salary cap. We conclude by suggesting extensions linking our work to the existing thought on product differentiation and location choice models in the Industrial organization literature.