The designated player dilemma: an analysis of demand for star players in Major League Soccer

<p dir="ltr"><b>Research Question: </b>In 2007, Major League Soccer (MLS) implemented a designated player (DP) rule that permitted clubs to pay salaries to certain players above the pre-existing salary cap. The policy attracted previously unaffordable talent to the league and successfully increased matchday attendance, an important revenue source for MLS. We investigate whether the number of designated players appearing in a match impacts fan attendance at matches.</p><p dir="ltr"><b>Research Methods: </b>Utilizing attendance and match data from MLS matches from 2010 to 2018, we estimate a series of regressions to analyse the effect that DPs had on live attendance.</p><p dir="ltr"><b>Results and Findings: </b>Our findings indicate that the optimum number of DPs that maximize attendance ranges between four and five and this turning point does not differ between standard DPs or marquee DPs. Furthermore, when splitting DPs based on home or visiting sides, there is only a non-linear impact on home DPs.</p><p dir="ltr"><b>Implications: </b>Our findings have important managerial implications for MLS and other professional sport leagues that have special exemptions to allow teams to sign a set amount of star talent. Indeed, MLS has considered reducing the number of DPs that a franchise can sign to maximize the financial benefits of star players in the league.</p>