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I Do Not Kid About Baseball, And Especially Not About Baseball And Economics…

March 14th, 2009 · 5 Comments
Econ 101 · Sports

(In case you were ever wondering, most of my subject material comes from conversations I have either with readers or with my friends or students. In this case, a former student of mine had the following as his Facebook status: “Just got a fortune cookie that said ‘You can’t learn less.’ I should give this to the Dean.” I pointed out that, at the very least, he learned where the mud on major league baseballs came from, since he called me out on my story in the middle of class. For the record, he had a laptop in front of him at the time, so I told him to Google it. He eventually acknowledged that I know my random baseball facts.)

The economics of monopolies is taught as a part of most introductory economics courses (“principles” courses in academic lingo). In introducing such a topic, we generally explain that a monopoly occurs when there is only one seller but many buyers in a market for a product. (Technically in order to truly be a monopoly there has to be a lack of close substitutes for said product. Also, if you are a huge geek like me, you will be entertained to know that a firm in a market with one buyer and many sellers is referred to as a monopsony.) Now, it is helpful to think about why there could be a market with only one seller, and we list off a number of potential reasons:

  • One firms owns the key resource necessary to make the product
  • The government licenses only one firm to provide a product or service (eg. Amtrak, the US Postal Service, sort of)
  • Economies of scale make one large producer more efficient than a number of small producers (This is called a natural monopoly, and you can think of a cable or land line provider as an example.)

To begin an example of the “key resource” case, I ask if anyone has ever caught a ball (foul, home run, or chucked into the stands by the ball boy) at a major league baseball game. Luckily, I usually get at least one positive response, since otherwise the storytelling gets awkward. I then ask the respondent what is on the ball when he or she catches it. This is apparently a confusing question, and I usually get a blank stare in response. I prod with “It’s all dirty, right?” and typically am rewarded with a timid nod. But how can this be? If you pay close attention, you will notice that a ball is usually discarded when it hits the dirt. (Balls are replaced after 6-8 pitches in general.) So how would that ball be as dirty as it is when it gets to the fan?

The balls are dirty because the umpires (I am told it is the umpires, but I imagine that this isn’t necessarily literally the case) rub mud on some 70 or so balls before each game. This is done simply to make the balls less slippery and shiny and thus easier to handle.

At this point, you are probably wondering where on earth I am going with this in regards to monopolies…you see, the only mud that has been deemed acceptable for such purposes comes from a certain spot in the Delaware River somewhere in New Jersey. Furthermore, only one organization knows where this spot is, so this organization has a monopoly in the market for baseball rubbing mud. Boom. It is interesting (at least to me) to note in this case that the key resource owned is not the land that the mud comes from, but rather the knowledge of where said land is.

If you want more details on the baseball mud (you know you do), you can find the story here. (Yes, that link actually takes you to baseballrubbingmud.com.)

Tags: Econ 101 · Sports

5 responses so far ↓

  • 1 Steve Davis // Mar 15, 2009 at 9:38 am

    Wow, that’s fantastic. I knew about the major league mud getting rubbed on the baseballs, but I had no idea that the basis for the monopoly was the knowledge of where to get the mud. I wonder if the economics are truly monopolistic, and if so, how MLB enters the negotiation (e.g., how much would it really cost them to switch to substitute mud?). It seems like a little chemistry project with some trial and error would allow them to find substitute mud…

  • 2 econgirl // Mar 15, 2009 at 3:23 pm

    A reader points me to the mlb rulebook:

    http://mlb.mlb.com/mlb/downloads/y2008/official_rules/03_game_preliminaries.pdf

    “Before the game begins the umpire shall…Receive from the home club a supply of regulation baseballs, the number and make to be certified to the home club by the league president. The umpire shall inspect the baseballs and ensure they are regulation baseballs and that they are properly rubbed so that the gloss is removed.”

    Interesting to note that the type of mud is not actually specified in the rule. I suppose that would give the already existing mud monopoly way too much bargaining power. 🙂

  • 3 John F. Opie // Jun 11, 2010 at 5:18 pm

    Now let’s read carefully what is said:

    “…that they are properly rubbed so that the gloss is removed.”

    This means that there is at least one way to rub, but that it is possible for more than one way to rub the gloss off. Now, this opens a can of worms for the regulatory agency: they have a requirement for “proper rubbing” that is not otherwise defined.

    The MLB, in its infinite wisdom, has settled on a single methodology to define the “proper” way of rubbing, of a product that is apparently consistently capable of a proper baseball rubbing, where the supplier provides the product without disclosing anything other than that it properly does the job.

    In that case, it isn’t that the supplier has a monopoly at all: it’s just that MLB has decided, by dint of refusing to purchase any and all alternatives, to grant a 1:1 relationship, i.e. this is both a monopoly and a monopsony, but in both cases an artificial one. MLB is not the only arbiter of where mud comes from in terms of professional baseball (because baseball is also played professionally in no less than 86 other countries!), and the only requirement is “proper” rubbing.

    That MLB buys only this product does not mean that there are no alternatives: it simply means that MLB has deemed this seller to be the sole supplier. As a long-time fan of the Bad Homburg Hornets, of the 2. League in Germany, I also know that in at least one other country, there is no such requirement of using that particular mud. I’ve seen the umpires rub the balls down with whatever was available (usually home base dirt) and both teams would inspect and give their approval to at least one case of such-treated baseballs (which after the game were then used for practice: no recycling allowed!).

    Hence it’s not a natural monopoly, just one limited to the US.

    But it’s still a good story. 🙂

  • 4 econgirl // Jun 11, 2010 at 9:14 pm

    Not all monopolies are natural, and that is kind of the point. A natural monopoly is one where economies of scale are so prevalent that a single large firm can produce at lower cost than smaller firms and thus it doesn’t make sense for smaller firms to enter the market. It’s certainly possible for a monopoly to be a monopoly without this being the case, usually for one of the reasons mentioned above. Major League Baseball essentially granted the mud-producing firm a monopoly by writing into its rules that nothing else was acceptable. In turn, Major League Baseball is in itself a monopoly, as are other national sports leagues, and they are allowed to exist because they have exemptions from the Sherman Antitrust Act. I recall this being an issue a while back for the NBA, and I was going to provide you to a link, but my first page of Google results for “NBA monopoly” consisted of the interwebs trying to sell me a board game.

  • 5 UnnamedBaseballExecutive // Jun 11, 2010 at 10:57 pm

    Your intuition about the umpires not rubbing the baseballs is correct. Just as a clubhouse manager takes care of the players (food, laundry,…), the umpires also have an attendant. This person usually supplies the labor for this task. The umpires just come behind and inspect.

    I can’t say for sure all teams do it this way, but it was true in the organizations I’ve worked for.

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