Salary Cap in Professional Sports


In professional sports, a salary cap is a system that limits the total amount of money a team can spend on their players. In the NHL 2016-17 season, for example, a team could not spend more than $73 million on their players, and no less than $54 million. It's also a system that's been recently adopted by the major leagues, within the past few decades, most notably in the NBA, NFL and NHL.

The salary cap increases parity in a league; parity refers to each team having roughly equivalent levels of talent and odds at winning a championship. Low parity means the league is unbalanced, with dominant teams that make it to the finals each year. High parity is the opposite, where every team is roughly the same in skill level.

In the MLB, there is no salary cap. Teams like the Red Sox, Cubs, and Yankees have the highest payrolls in the league (~$210 million), while at the bottom, the Rays have only $61 million to spend on their players. It obviously decreases parity, as teams with higher payrolls can incentivize good players with money and stack their teams with talent, at the expense of poorer teams.

Out of the major league sports, the NHL has the highest parity, thanks to its salary cap set at the right levels. Each team has the same chance at getting good players, and it's never clear which team will win on any given night. In the 2018-19 season, the 1st place team in the Eastern Conference and the league, the Lightning, were sweeped 4-0 in the first round of the playoffs to a wild card team. The same happened with the 1st place team in the Western Conference, the Flames, who fell 4-1 to a wild card team in the first round as well.

Amazingly, while the NBA has a salary cap system, it's not one that is enforces parity well; recently, a team went 76-6 in a season, and for the past four years, the same two teams have met in the final each time. Being a fan for any of the other 28 teams must be difficult, knowing almost for sure that your team is doomed right from the start of the season.

https://swisshockeynews.ch/index.php/swisshockeyblogs-ch/65-nhl-explained/8124-how-does-the-salary-cap-work

https://bleacherreport.com/articles/1363011-nhl-lockout-what-effect-would-no-salary-cap-have-on-the-nhl

http://harvardsportsanalysis.org/2016/12/which-sports-league-has-the-most-parity/

https://www.spotrac.com/mlb/payroll/

Comments

  1. AnonymousApril 23, 2019 at 3:40 PM

    This is really interesting, thanks for sharing!! From reading your article I got really interested in the Warriors' contracts, specifically Curry's. I read that the salary cap for 2019-2020 is 109 million yet Curry is the number one paid player in the NBA, and is currently in his 5 year contract for 201 million! And that doesn't even include advertisement partnerships. His endorsement partners consist of Under Armour, Chase, Vivo, eHi, Nissan/Infinity, Brita, Bubble, and JBL and this generate about 42 million off the court. Crazy stuff

    ReplyDelete

Post a Comment

Popular posts from this blog

The Cost of Inelastic Goods

Image
Many goods that are inelastic in terms of demand are ones that are essential or, in other words, necessary to one's self. There are several examples: basic foods, gasoline, or even medicine. I was interested in how producers can manipulate the prices of these goods and how the total revenue can change over time because those goods are inelastic. The first example I thought of was insulin. Considered inelastic because, without it, those who are diabetic might physically suffer, I looked at the price trends in the past couple of years. Just as I predicted, the price has been rising dramatically in the past decade or so as producers are taking advantage of the consumers' essential need for this good. There are about 7.4 million Americans that use insulin and many struggle to pay the costs of this increasingly expensive drug. So, while rising prices benefit insulin manufacturers, those same prices come at a serious cost for patients as the demand for insulin is inelastic. Other...
Read more

The Economics and Psychology of Gambling

Image
As gambling around the world continues to increase, governments are starting to see these often self-destructive habits as a way to get money from their residents. Gambling has been seen as immoral and manipulative on the part of casinos, as well as pitiful on the parts of the people that gamble all their money away. It is seen as immoral and a “lazy way” to make money that isn’t even assured to get you anything. So what keeps bringing people back to the card table or slot machine? There are many theories about why someone would continuously gamble any money that they make to the point of landing themselves in debt. In many cases, the gamiling becomes an addiction, though many professionals have reservations on calling it that, that gets increasingly hard to kick. It is irrational for someone to continuously lose money and keep going back only to lose more. Or is it? The utility that some get out of gambling may feel like spending the money is worth it. As far as recreational ...
Read more

The Hidden Monopolies of the World

 Monopolies are all around us in the world, and not all of them are  obvious on the surface level like Google and Facebook. For example, you might be searching for hotel rooms and browse multiple "competing" sites like Travelocity, Trivago, or Hotel.com. What you most likely do not know however, is that all three websites are actually all owned by the same company; Expedia group. This illusion of free choice is used to hide the fact that Expedia essentially hold a monopoly over the industry and all hotel bookings actually go through them. These fake competitors which are all owned by Expedia Group controls 75% of the US online travel agency industry, Similarly, apple fans and Microsoft fans stubbornly stick to their respective brands of computers; not knowing that the laptops all come from the same Chinese manufacturer. Throughout all types of industries such as the ones listed earlier and others such as smartphones, supermarkets, beer, and even sunglasses, hidden parent co...
Read more