Measuring competitive balance in sports using generalized entropy with an application to English premier league football

A central issue in the economics of sport is the degree of competitive balance in sporting contests. The importance attached to competitive balance is predicated on the belief that it is uncertainty about the outcomes of sporting contests that attracts spectators and sponsors. In a perfectly balanced competition, each team would have an equal chance of winning each match and, therefore, of winning the championship or the league. By contrast, the absence of competitive balance would mean that the results of sporting contests would become predictable and attendance at sporting contests would suffer. The general theme that underpins the issue of competitive balance is that of inequality. This article proposes a general measure of competitive balance based on the Generalized Entropy (GE) approach to measuring inequality and shows how this might be interpreted in terms of the league's welfare. The measures are applied to results from 2006 to 2007 season of the English Premier League (EPL).