Super-teams or fair leagues? Parity policies by powerful regulators don't prevent capture

TL;DR

This study analyzes how professional basketball leagues struggle to maintain competitive parity over time, revealing that dominant teams can institutionalize their advantage despite regulatory efforts, leading to decreased competitiveness.

Contribution

It introduces a novel measure of league parity through transitivity violations and demonstrates the decline in competitiveness over a century of data.

Findings

Basketball leagues have become less competitive over time.

Rich-get-richer dynamics persist despite regulation.

Leagues fail to prevent institutionalization of team advantages.

Abstract

Much of modern society is founded on orchestrating institutions that produce social goods by fostering motivated teams, pitting them against each other, and distributing the fruits of the arms races that ensue. However, even when the "market maker" is willing and able to maintain parity between teams, it may fail to maintain a level playing field, as some teams acquire enough advantage within the system to gain influence over it and institutionalize their advantage. Using outcomes of over 60,000 games from four professional basketball leagues and more than 100 years' worth of seasons, we compute the evolving rate of transitivity violations (A>B, B>C, but C>A) to measure the ability of leagues to maintain parity between teams, and support the efficient generation and distribution of innovation. Comparing against a baseline of randomly permuted outcomes, we find that basketball has become less competitive over time, suggesting that teams diverge in performance, and reflecting a possible failure of market makers to tame their overpowered teams. Our results suggest that rich-get-richer dynamics are so pernicious that they can even emerge under the watch of a powerful administrator that is motivated to prevent them.