Free-Agency and the Competitiveness of Major-League Baseball

I investigate whether the removal of the reserve clause in professional baseball has affected the competitive nature of the industry in the context of whether teams are actively attempting to monopolize in high- valued 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 affect the competitive nature of the industry. To investigate this possibility, I calculate the Herfindahl-Hirschman Index for homeruns and strikeouts in professional baseball from 1920 to 1993, and relate them to structural changes in baseball. I isolate the structural effect of free-agency and find no evidence that free agency has altered the competitive nature of the industry. My findings support those in Hylan, Lage and Treglia (1996).