Free-Agency and the Competitiveness of Major League Baseball

I investigate whether the removal of the reserve clause in professional baseball a ected the competitive nature of the industry in the context of whether teams are actively attempting to monopolize in highvalued inputs. It is possible that a very few teams could purchase all of the best players over time leading to a highly concentrated industry in certain production categories and adversely a ect the competitive nature of the industry. To investigate this possibility, I calculate the Her ndahl-Hirschman Index for home runs and strike outs in professional baseball from 1920 to 1996 and relate them to structural changes in baseball. I isolate the structural e ect of free-agency and nd no evidence that free agency has altered the competitive nature of baseball. My ndings support those in Hylan, Lage and Treglia (1996). Department of Economics, Box 19479, Arlington, Texas 76019-0479. O ce: (817) 272-3290. Fax: (817) 272-3145.