Monday, August 23, 2010

The Profitable Pittsburgh Pirates

Today, ESPN writes that the Pittsburgh Pirates made between $14.4 and $15 million dollars after taxes in 2007 and 2008 (h/t Cameron M.). In the article, David Berri (co-author of The Wages of Wins) makes a statement that the NY Yankees seem to maximize winning and the Pirates seem to focus on profits. There does seem to be some anecdotal evidence for this statement. This brings up a good question: under revenue sharing, do teams use the shared revenues to increase their winning or increase their profits - or more likely, both?

As I see it there are two fundamental problems to answer this question: one is the lack of data. There are now a few teams financial data available, but overall this information is limited. The second (in my opinion) is that we do not have a systematic view of the theory of sports league behavior. In other words, we have models that focus on profit maximizing or win maximization, but do not have a model that allows for both and thus are limited in what we can say about the impacts of revenue sharing on team behavior.

Here's my good friend and co-author's take on NPR.

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