Beyond the game: Three essays on how economics links to the industry of basketball

Abstract

This dissertation is conducted to the study of a current topic in the economic scope, which is the result of the application of techniques and methodologies of analysis typical of Economics to the sports field. Sports Economics is a rather novel discipline, compared to other branches of Economics, whose results have a growing consideration within the academic world, sparking the interest of many researchers. The final motivation of the three chapters presented in this work is to delve into some crucial aspects of sports such as production function, efficiency, competitive balance and heterogeneity of the inputs included in the team, from an economic perspective. In all of them this dissertation tries to contribute to the literature on the sports economics with new variables and experiments, as well as to debate about the most spread theories and assumptions. The first chapter analysis the efficiency and the evolution of the Total Productivity in Spanish First division Basketball teams during their productive process, just considering the performance on the field. The empirical part relies on the use of non-parametric techniques of optimization, measuring efficiency with respect to the best observations of the sample through a data envelopment analysis (DEA). This technique is the more suitable for sports given that it does not consider a specific functional form for the frontier as well as the absence of errors. The results obtained make sense for both, the teams themselves (coaches and managers) and for the regulatory body. Fort he case of the teams as much as they can undertake actions that improve their productivity. Fort he regulatory body the results are determinant to take initiatives, which encourage the evolution of the efficiency of the teams as a whole. The second part addresses the issue of the competitive balance comparing the two conferences in which are divided the NBA teams, and its relationship with demand, which is not clear in the literature. The methodology of analysis is based on Gibrat’s clasical model using the number of relevant competitors as an indicator of competitive balance which avoids some of the problems that the typical indexes of concentration present when it comes to sports competitions. This paper delves into the relationship between competitiveness and spectator’s demand, keeping in mind the Rottenberg’s hypothesis, or which is the same, the willingness of attending the sport event increases with the level of competitiveness. The Granger causality tests are not conclusive due to the level of spectacle reached by the competition independently of the sport game in particular, which makes very common the sold-out in almost every game. Chapter 3 tackles the configuration of the teams in terms of optimal level of diversification providing experimental evidence on the relationship between outcomes achieved and heterogeneity of the inputs. The methodology is based on the diversification index of Gollop and Monahan whose decomposition provides much more information. Every component of the index make sense by themselves and are used in the second part of the paper in different estimations as determinants of the performance of the teams. All in all, the three pieces contained in this dissertation address the relationship between economy and sports, but every paper can be read independently considering the different analysis accomplished in each of them.