Date of Award

6-2011

Document Type

Open Access

Degree Name

Bachelor of Arts

Department

Economics

First Advisor

James Kenney

Language

English

Keywords

NHL, collective bargaining, salary, teams, sports

Abstract

After a lockout that canceled the 2004‐05 season in the National Hockey League (NHL), the owners and players reached a collective bargaining agreement (CBA) that instituted a ‘hard’ salary cap, a modified revenue sharing system, and changes in free agency. The principal motivation for the new agreement was to raise competitiveness among the teams, in order to generate greater revenue and profitability and to support higher player salaries. The purpose of this study is to evaluate the impact of the CBA on competitive balance within the NHL and identify the principal determinants of the changes in competitiveness among the teams. We evaluate several alternative measures of competitive balance: dispersion in point percentage; the Herfindahl‐Hirschman index; the Gini Index; number of playoff games; and number of times a team has made the playoffs. We then develop and estimate alternative models of the determinants of point percentage (equal to points earned by a team divided by total possible points), in which point percentage is hypothesized to be a function of team payroll (a proxy for player talent) and free agent signings. We estimate the models using a sample of all 30 teams in the NHL across eleven seasons, including five seasons prior to the 2005 CBA (2000‐2004) and six seasons after its implementation (2006‐2011). We find that the new CBA has increased competitive balance, primarily because of a reduced impact of team payroll on point percentage and the facilitation of free agent signings which have more nearly equalized the talent across teams.

Download

Share

COinS