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

09/21/2020

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by   Adam Sawyer, et al.

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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.