Major League Baseball Salary Cap Analysis

The completion in Major League Baseball has been greatly imbalanced since the strike shortened season of 1994. Competitive balance should 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 which is parity. One of the primary reasons for the competitive imbalance that does occur in Major League Baseball is difference in how much revenue teams bring in. 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. Small market teams such as the Minnesota Twins, Milwaukee Brewers, and Montreal
There are two types of salary caps a hard cap and a soft cap. A hard cap does not allow a team to exceed the limit for any reason. An example would be the National Football League. A soft cap has exceptions which allow teams to exceed the cap for certain reasons. The National Basketball Association is a league which has a soft cap. I will look at how a hard salary cap would affect parity in Major League Baseball. There would also be a minimum salary limit to keep teams from having low in order to maximize
The Yankees payroll was 156 million last year compare that to the team with the second highest payroll the Los Angeles Dodgers at 115 million and it is easy to see that the Yankees are able to spend much more money on their team than any other organization. Then compare the Yankees payroll to the lowest 21 team payrolls and the Yankees payroll more than doubles any of these teams. This shows that teams on the high end of payroll have much more money to work with when signing players to play on their teams. Competitive balance focuses on whether the salary cap would be able to allow all teams, particularly teams with the bottom ten payrolls to be competitive or would it have no affect or would it make the situation that exists worse. The production function for success of a club is: Success = (payroll + player talent + coaching talent + scouting talent - injuries). This is the production function for success because these are the factors that lead to successful winning seasons. Payroll is high on the list because it directly affects other factors in the production function. The way that payroll correlates with the success of a team is that teams with high payrolls are more likely to have successful seasons. It affects all other