Without this sports excitement, the league and the events would be dull and would not attract fans and customers. The uniqueness of the sports world lies in the fact that they develop their business on selling competition.
One of the key features of the economics of sports is that the demand for its product is related to the uncertainty of the outcome (Garland, Malcom & Rowe, 2000). The league attempts to restrict competition so that no one team is able to gain too much market power or excessive dominance. If any team of professional team sports gains monopoly, it would cause the revenue to disappear altogether (Garland, Malcom & Rowe, 2000).
There are many ways to measure competitive balances, the most frequently used metrics are standard deviation and win percentages of the teams for a given year, ratio of the actual to idealized standardized standard deviation of win percentages, ratio of top to bottom win percentages, the range of win percentages, the gini coefficient of win percentages and the excess tail frequencies (Zimbalist, 2004).
It is assumed that fans have a strong preference of uncertainty of outcomes for the purpose of hopes and expectations. The best measure to use would be one to which consumers show most sensitivity (Zimbalist, 2004).
In his book “Handbook of sports economics” (2006) Fizel explains that there are many measures of competitive balance, but their efficacy is still argued over. However the arguments over the relative efficacy are due to the inability to understand the distinction between the three main elements of competitive balance.
remain at the top and those which are not remain at the bottom for long periods of time. Although it is widely agree that competitive balance is essential for keeping fans interested, it has also been viewed that in certain cases the home team’s performance has a significant impact on the attendance. This is in contrast to the hypotheses of uncertainty of outcome. This probability