Joseph Koopmeiners
The 1999 St. Louis Rams shocked the football world winning Super Bowl XXXIV
a year after going 4-12. Two years later, the New England Patriots completed a similar worst-to-first turnaround winning Super Bowl XXXVI a year after going 5-11. These surprising results lead football fans and sports writers to speculate that the NFL had entered a new era of parity due to the implementation of the salary cap and free agency before the 1994 season. Economists have written extensively on competitive balance in professional sports. Larsen et al. (2006) examined the effect of the salary cap and free agency on competitive balance in the NFL and found no significant difference in the standard deviation of team winning percentages before and after the 1994 season. The analysis of Larsen et al. has two primary limitations. First, using the standard deviation of team winning percentages as the outcome ignores that game results are the result of paired comparisons and therefore not all winning percentages are created equal. Second, Larsen et al. do not account for changes in year-to-year autocorrelation over time that could explain rapid improvements such as the 1999 Rams or 2001 Patriots.
We model NFL team strengths using a Bayesian state-space model that treats
game results as paired comparisons and allows for the comparison of the
standard deviation and autocorrelation of NFL team strengths by decade. The
year-to-year autocorrelation in NFL team strengths has decreased steadily
from .781 in the 1970s (95% CI: .665, .871) to .566 in the 2000s (.350,
.755). The standard deviation of NFL team strengths has decreased from .862
in the 1970s (.708, 1.07) to .731 in the 2000s (.589, .914) but there has
been little change since the 1980s (.737, 95% CI: .603, .923).
