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Cross-subsidization, Incentives, and Outcomes in Professional Team Sports Leagues

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Author Info
Rodney Fort
James Quirk
Abstract

Professional team sports leagues provide insight into the problems facing the management of functioning cartels. This paper provides an analysis of the incentives and outcomes inherent in the management of professional team sports cartels. Except for revenue sharing and salary caps, league cartel management outcomes are consistent with league-wide revenue maximization and have no impact on competitive balance. However, there are predictable impacts on the profitability of strong- and weak-drawing teams within the league. While providing an analytical review of the literature, the work here also yields new results concerning salary caps, local TV revenue sharing, and the behavior of cartel managers in the face of rival leagues.

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File URL: http://www.e-jel.org/archive/sept1995/Fort.pdf
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Publisher Info
Article provided by American Economic Association in its journal Journal of Economic Literature.

Volume (Year): 33 (1995)
Issue (Month): 3 (September)
Pages: 1265-1299
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Handle: RePEc:aea:jeclit:v:33:y:1995:i:3:p:1265-1299

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  1. Sherwin Rosen & Allen Sanderson, 2000. "Labor Markets in Professional Sports," NBER Working Papers 7573, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Kevin Alavy & Alison Gaskell & Stephanie Leach & Stefan Szymanski, 2006. "On the Edge of Your Seat: Demand for Football on Television and the Uncertainty of Outcome Hypothesis," Working Papers 0631, International Association of Sports Economists. [Downloadable!]
  3. Martin Grossmann & Helmut Dietl & Markus Lang, 2007. "Revenue Sharing and Competitive Balance in a Dynamic Contest Model," Working Papers 0070, University of Zurich, Institute for Strategy and Business Economics (ISU), revised May 2009. [Downloadable!]
    Other versions:
  4. Kathleen A. Carroll & Brad R. Humphreys, 2003. "Agency Behavior in a Nonprofit Setting: Effects of the 1984 Supreme Court NCAA Decision," UMBC Economics Department Working Papers 03-106, UMBC Department of Economics. [Downloadable!]
  5. Allen R. Sanderson & John J. Siegfried, 2003. "Thinking About Competitive Balance," Working Papers 0318, Department of Economics, Vanderbilt University. [Downloadable!]
  6. Marko Tervio, 2003. "Mediocrity in Talent Markets," Institute for Research on Labor and Employment, Working Paper Series 1098, Institute of Industrial Relations, UC Berkeley. [Downloadable!]
  7. Lawrence M. Kahn, 2000. "The Sports Business as a Labor Market Laboratory," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 75-94, Summer. [Downloadable!] (restricted)
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