ECONOMICS AND BUSINESS STRATEGIES Essay Example | Topics and Well Written Essays - 1500 words

ECONOMICS AND BUSINESS STRATEGIES - Essay Example One of the popular measures of competitive balance is the actual square root of the variance of win-ratios of a certain season and it is compared with the mean root square deviation of the win ratios in the most ‘appropriate’ case where the wins are allocated in a random manner (Owen, Ryan and Weatherston, 2005, pp.4-5). According to Zimbalist, the professional sports teams participating in a league both corporate and compete with each other. The success of a competition is dependent upon the degree of uncertainty of outcomes. It can be stated differently as the degree of competition among the teams acts as a factor in the success of a league. (Zimbalist 2003, Sports as Business, pp. 503). By perfect competition, economists define a market structure under some assumptions which are unlikely to exist in the real world scenario. It talks about a market where the market power of the participants is limited to set the price of a homogeneous product. Some of its characteristics include unlimited number of buyers and sellers, factors are free to move, and perfect information exists to all the participants. When a firm is able to gather higher levels of profits than the average of all other firms existing in its industry, a situation of competitive advantage is said to exist for the firm and it is of mainly two types namely advantage over costs and differentiation advantage. To attain a successful sporting outcome it is required to maintain a certain degree of competitive balance which is described in the hypothesis of â€Å"uncertainty of outcome†. Gate sharing revenue is one of the popular means of improving competitive balance. This means is very common knock out competitions. However some other means of improving the competitive balance includes salary caps, and luxury taxes. The Major League Baseball adopted an equal splitting of gate receipts which were reduced with time. Since 2003 the clubs participating in the American League