Franchise owners of commercial sports teams in North America are continually (or so it seems to most observers) threatening to move the franchise from one city to another city unless the current host city provides additional subsidies to the franchise owners to assure that the franchise earns high profits (Noll & Zimbalist, 1997). One can dismiss most of the claims by franchise owners that finances for the sports teams are in dire straights because, if that were true, the franchise owners would not continue in business (Zimbalist, 1992). Thus, while extraordinary accounting procedures can be applied to produce whatever performance result is desired, the realistic assessment is that through some mechanism (tax write-offs against other earnings, depreciation, and so forth) the cash flow to the franchise owners is sufficient to keep them in the game.
This report has a dual purpose. The first part of the report purpose is to describe how microeconomic theory might explain why a franchise owner might decide to move a team from one city to another city. The second part of the report purpose is to test the theory to assess the validity of the microeconomic explanation.
To test the microeconomic prediction, the won/loss records (percentage of wins) and position in the final standings of teams involved in four franchise moves are compared. An assumption is made that the comparative won/loss records (percentage of wins) and position in final standings is an acceptable proxy for economic/financial performance (Kahle, Kambara, & Rose, 1996).
The four franchise moves examined are four of the more well-known shifts that have occurred in the National League of Major League Baseball. The four franchise moves are as follows:
Brooklyn Dodgers ? Los Angeles Dodgers - 1958
New York Giants ? San Francisco Giants - 1958
Boston Braves ? Milwaukee Braves - 1953
Milwaukee Braves ? Atlanta Braves - 1966
The won/loss data (percentag...