Incentives at heart of economics, baseball

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For the second year in a row, the Augusta GreenJackets will not be competing in postseason play. This is despite posting the South Atlantic League Southern Division's best winning percentage this season at .572, winning 79 games.

The Greenville Drive (77 wins, .554 winning percentage) will take on the Savannah Sand Gnats (75 wins, .540 winning percentage) for the divisional title.

Why is the best team this season being excluded from the playoffs? The answer lies in the South Atlantic's split-season format. Instead of playing 140 games and the top two teams competing in the postseason (it would have been Augusta and Greenville this year), the league splits the season into two halves of roughly 70 games each. The winner of the first half (Savannah, 42 wins) plays the winner of the second half (Greenville, 41 wins).

The GreenJackets' players, coaches, managers and fans would have preferred a regular 140-game season to determine postseason play this year. But is a regular season league better than a split-season league overall? How do different league structures affect incentives?

I have published an academic article on this issue with data from Double-A leagues, but the basic issues can be illustrated with the South Atlantic. Savannah won the first half of the season and therefore secured postseason play by the middle of June.

What is their incentive to play hard in the second half having already claimed a playoff spot? Not much. They finished sixth out of seven teams in the second half of the season, winning just 33 games for a winning percentage of .478. In my analysis of Double-A teams, as many as one-third "give up" at some point in the season. In addition to the first-half winner giving up in the second half, teams without a chance of winning the first half might give up toward the end, but will play with renewed vigor in the second half.

So, if so many teams might not be trying their best, why is the South Atlantic using the split-season structure? There is a trade-off to be made: Teams in a regular 140-game season might give up for longer periods of time.

This is all very interesting you say (I hope!), but why is this in the business section of the paper and not the sports section?

Economics is all about incentives, choices and trade-offs. The way we design competitions and structure incentive schemes in sports or at work affects people's choices and subsequently their behavior. Many times there is not one best way to do something and trade-offs have to be made.

Consider the case of the Asheville Tourists in the South Atlantic's Southern Division. After 69 games (the end of the first half of the season) they were in last place, 121/2 games behind Savannah, having won just 29 games. If they were playing a regular 140-game season, what would be their chances of making the playoffs? Pretty slim. So, they might have given up for the rest of the season. Not particularly interesting for the fans. However, because they began the second half of the season with a .000 winning percentage like every other team, they had statistically as good a chance of making the playoffs by winning the second half of the season as everyone else. In fact, Asheville put together a very strong second half, finishing just 11/2 games behind Greenville, winning 40 games.

SIMON MEDCALFE IS A FINANCE PROFESSOR AT AUGUSTA STATE UNIVERSITY.


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