The Salary Cap and Major League Baseball.
Major League Baseball has seen a dramatic increase in competitive imbalance since the strike shortened season of 1994. Following the model found in the Major League Baseball Blue Ribbon Report competitive balance will exist when there are no clubs chronically weak because of Major League Baseball's structural features. Proper competitive balance will not exist until every well-run club has a regularly recurring reasonable hope of reaching postseason play. One of the primary reasons for the competitive imbalance that does occur in Major League Baseball is the disparity that exists in how much revenue teams bring in. A portion of, mostly large market, teams such as the New York Yankees, Boston Red Sox, and New York Mets are able to bring in large amounts of revenue. Other mainly small market teams such as the Minnesota Twins, Milwaukee Brewers, and Montreal Expos can only generate small amounts of revenue. This has created a situation where teams that can generate a large amount of revenue have the best teams because they have the money to sign the best players and have the highest payrolls. The teams that have the highest payrolls also tend to have the highest winning percentages and they tend to be the teams who win playoff games and championships. The teams who have the lowest payrolls on the other hand tend to have winning percentages that are below 50%. As evidence to the importance of payroll on wins, the correlation between team payroll and wins was .43 in 2002. This is a fairly strong correlation when considering how many factors should be an influence in generating a win. There are many measures that could be used to make teams more competitively balanced. These include the reverse order draft, revenue sharing, and the salary cap. The question we will address is, would the institution of a hard salary cap in Major League Baseball solve this problem of disparity among teams with high payrolls and low payrolls?.
