The Role of Consolation Play-offs

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[Archived from: The Sports Economist, 26 January 2011]

In football (soccer) news, the AFC Asian Cup Final takes place Saturday with three-time Asian champions Japan and confederation newcomers Australia vying for not only the title, but also a place at the 2013 Confederations Cup in Brazil.  However, in economic theory terms, perhaps the more interesting fixture is tomorrow evening’s Play-off for Third between perennial regional powerhouse South Korea and outsiders Uzbekistan, with these beaten semi-finalists losing their semis under dramatically different circumstances – the former in a heart-breaking penalty shoot-out and the latter routed 6-0.

This once again brings to light the role of consolation play-offs in major tournaments. Having it offers tournament organisers a chance to fill the scheduling gap between the semi-finals and the final (as well as the extra ‘bums on seats’), but some fans question whether the extra game is superfluous to some degree (this is not to mention some European club managers waiting for their players to return to their ‘regular’ jobs in the middle of the season).

In the World Cup, the play-off for third has generally produced wonderful football (relative to other matches) almost without exception in my living memory, except for 1994 when Bulgaria left their game face back in the team hotel, losing to Sweden 4-0.  With the pressure of winning the tournament removed (but still with an incentive to win), the players can feel free to break off the tactical shackles and showcase to the world just what they can do. Last year’s Germany-Uruguay showdown was certainly no exception.  In spite of all this, it seems that the question of whether the play-off for third should be axed is raised every time the penultimate game of the World Cup comes around.

The play-off does not exist generally in domestic cups, but they do exist in most major FIFA tournaments – not only the World Cup (including the womens’ and age contemporaries), but also the Confederations Cup, and Club World Championship. As for continental tournaments, they have historically been the norm as well, except (notably) Euro – UEFA dispensed with it after the 1980 edition in which the third-place playoff finished in a 9-8 penalty shoot-out win to Czechoslovakia over Italy.  More recently, the CONCACAF (North American) Cup abandoned the playoff after the 2003 tournament, while the Oceania Nations Cup is now the other exception, under a new format over several FIFA match days, rather than the standard short-format tournament.

Arguably, there has to be a strong (stand-alone) reason to motivate players to perform, since they can no longer claim the title.  In (most) team sports in the Olympics, finishing third carries with it the obvious prize of a bronze medal. FIFA arguably diminished the incentive for winning the play-off from the 1998 World Cup onwards when they decided bronze medals would be awarded to both the third- and fourth-place finishers.

The AFC have some incentive mechanism to make the teams produce their best football in the play-off for third – automatic entry (along with the two finalists) to the following Asian Cup.  It seems that this did not work in the previous Asian Cup in 2007 when the third-place play-off featured Japan and South Korea (it should be added that these two are bitter football rivals).  Despite the incentives on offer, both coaches decided to field largely experimental starting elevens, maybe with a view to the impending 2010 World Cup Qualifiers.  The game finished in an utterly forgettable goal-less 120 minutes and a 6-5 shoot-out victory to the Koreans.

Even that kind of incentive may not work for some teams. I am based in Australia, a country in which the national federation (FFA) is trying hard (but still struggling) to promote the game domestically in the wake of intense business competition from other sports for exposure.  The argument could be made that FFA want the national team to play more meaningful (not merely friendlies) matches over any given quadrennial cycle. Therefore, one may be tempted to wonder if automatic qualification would be seen as a disadvantage, since Australia would presumably be regarded as heavily favoured to qualify (if they had to) for the Asian Cup nonetheless.  Even without finishing in the top three, Australia would have qualified automatically as 2015 hosts making this argument a moot point.  Nevertheless, the counterfactual makes an interesting hypothetical about payoffs in tournament design, and perverse incentives to lose.

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Indian Premier League Spend/thrift

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[Archived from: The Sports Economist, 10 January 2011]

The 2011 Indian Premier League cricketer auction took place on the weekend. This event is a fascinating economic exercise on so many levels, and not just because of the auction framework, but also because it gives us a view into the future, in which pro-sport salaries on the subcontinent may begin to rival those in the major leagues (though this may still be some way off yet). Nevertheless, four players (all Indian), topped the US$2 million-mark, with the wonderfully-named Kolkota Knight Riders outlaying US$2.4 million for the enigmatic Gautam Gambhir.  For a quick summary of the auction outcomes, see:

http://www.espncricinfo.com/indian-premier-league-2011/content/story/496202.html

The inaugural IPL auction in 2008 was such a unique event insofar that all the World’s best cricketing talent was ‘up for grabs’ (except five Indian ‘icon’ players) simultaneously, with very little information about past player performance in the still-fledgling (at the time) Twenty20 form of the game – thus the bidders were relying a lot on information from longer formats of the game. The auction inspired my colleagues Wayne Geerling and László Kónya and I to apply hedonic price models to the 2008 auction data – see this Working Paper.

This time around, the auction was not of quite as much intuitive appeal economically – bidders now have a much better idea of how players perform in the short-form of the sport, while there were options for the franchises to retain players previously on their lists, creating labour-market rigidities not present in 2008.

I am still digesting the big movers (winners and losers), but it seems like a sensible take on proceedings to suggest: (i) the obvious – that the cap, and subsequently wages, are significantly higher overall; (ii) that the prices are more predictable this time around; and (iii) that the ‘superstar’ effects typically observed in pro-sports are even more profound this time.

Much has already been written on not only player values and associated labour-market issues in cricket, but also on the profound effect that Twenty20 and the IPL is having on the business model of cricket (which has really only had one revolutionary change since the first ever Test Match in 1877). What I would like to see economists do is apply some auction theory to this setting – to the best of one’s knowledge; this is yet to be done by anybody.

NFL Even MORE Competitively Balanced than We Thought

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[Archived from: The Sports Economist, 3 January 2011]

With the NFL regular season having reached its (customarily gripping) climax moments ago, sports economists will take note, as usual, of the within-season competitive balance measures, based on the end-of-season standings.  The figures generated from these measures are often used in the literature on the effectiveness (or otherwise) of labor market and revenue-sharing policies used by leagues to maintain/improve competitive balance.

On the basis of these measures, it is generally accepted by sports economists that the NFL has been the most competitively balanced (on average) of the four major leagues over the last few decades.  However, there is continued debate as to the degree, if any, to which this outcome has been generated by various NFL policies that are not used by the other major leagues – for example, the comprehensive revenue-sharing arrangement from the centralized national broadcast contract.

The 2010 season was, according to the popular actual-to-idealized standard deviation ratio, the second-most balanced NFL season since 2002, and it is the same story if one instead uses other popular measures, such as Gini coefficients or Herfindahl indexes.  This result is favorable to those that believe in the invariance principle – that arguably, this is some (albeit very limited) evidence that the salary cap was not previously contributing much towards making the NFL so balanced.

Another policy that is often ignored in this analysis is fixture design.  One thing that distinguishes the NFL from the other major leagues is that the fixture has a strength-balancing element to it.  Specifically, as explained in the Wikipedia NFL page:

Each team plays once against the other teams in its conference that finished in the same place in their own divisions as themselves the previous season, not counting the division they were already scheduled to play.

With this in mind, one might be tempted to wonder to what extent the higher level of balancedness in the NFL is attributable to this scheduling policy.  After all, if below-average teams are playing other below-average teams more often (think: NFC West), mutatis mutandis for above-average teams, then the standings could arguably provide a distortive impression of balancedness.

In an attempt to answer this question, I extended a model from a paper just published in Economic Modelling (on the Australian Football League) to adjust the win percentages of the 32 teams, according to the strength of the schedule that each faces, prior to calculating the within-season measures.  The upshot is that the power-balancing aspect of the fixture does very little to create an illusion of greater balancedness, and that this is overwhelmed easily by other biases in the fixture, specifically the design requirement to play teams in one’s own division more often than teams in other divisions (especially so for divisions in the other conference).

Ultimately, on the basis of the adjusted win percentages, the NFL is found to be even more competitively balanced than on the basis of the original win percentages in every single season over the 2002-2009 sample, according to each of the four measures used.  Furthermore, the average difference is statistically significant.  A draft of the paper can be found here (any comments welcome).  For the record, 2010 produces the same outcome yet again (note that higher means less balancedness): the actual-to-idealized standard deviation ratios are 1.474 (unadjusted) and 1.362 (adjusted); the Gini coefficients are 0.264 (unadjusted) and 0.203 (adjusted); and the Herfindahl indexes of CB are 1.136 (unadjusted) and 1.116 (adjusted).  Furthermore, while the adjustments almost always dictate some differences in playoff outcomes, 2010 was highly unusual in the sense that the adjusted standings would have produced the identical 1-6 playoff seedings in both conferences.

Some economists argue that the NFL is, if anything, too balanced.  Therefore, you can interpret this result as you like.  Nevertheless, having repeated the exercise using NBA data and finding that this ‘unbalanced schedule’ adjustment makes no difference, we can conclude that for comparative purposes, accounting for differences in strength of schedules is an important element of using empirical major league evidence on competitive balance policies.  This is especially the case if one wishes to compare the major leagues with the major soccer leagues of Europe, in which each team plays all other teams the same number of times.