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The Effect Of Gate Revenue Sharing On Social Welfare

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  • HELMUT M. DIETL
  • MARKUS LANG

Abstract

"This paper provides a theoretical model of a team sports league based on contest theory and studies the welfare effect of gate revenue sharing. It derives two counterintuitive results. First, it challenges the "invariance proposition" by showing that revenue sharing reduces competitive balance and thus produces a more unbalanced league. Second, the paper concludes that a lower degree of competitive balance compared with the noncooperative league equilibrium yields a higher level of social welfare and club profits. Combining both results, it concludes that gate revenue sharing increases social welfare and club profits in our model. "("JEL "L83) Copyright (c) 2008 Western Economic Association International.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Contemporary Economic Policy.

Volume (Year): 26 (2008)
Issue (Month): 3 (07)
Pages: 448-459

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Handle: RePEc:bla:coecpo:v:26:y:2008:i:3:p:448-459

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  1. Sonia Falconieri & Frédéric Palomino & József Sákovics, 2004. "Collective Versus Individual Sale of Television Rights in League Sports," Journal of the European Economic Association, MIT Press, MIT Press, vol. 2(5), pages 833-862, 09.
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  10. SZYMANSKI, Stefan & KÉSENNE, Stefan, 2003. "Competitive balance and gate revenue sharing in team sports," Working Papers 2003003, University of Antwerp, Faculty of Applied Economics.
  11. Scott E. Atkinson & Linda R. Stanley & John Tschirhart, 1988. "Revenue Sharing as an Incentive in an Agency Problem: An example from the National Football League," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 27-43, Spring.
  12. Christian Riis & Derek J. Clark, 1997. "Contest success functions: an extension," Economic Theory, Springer, Springer, vol. 11(1), pages 201-204.
  13. Thomas Hoehn & Stefan Szymanski, 1999. "The Americanization of European football," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 14(28), pages 203-240, 04.
  14. Dixit, Avinash K, 1987. "Strategic Behavior in Contests," American Economic Review, American Economic Association, American Economic Association, vol. 77(5), pages 891-98, December.
  15. Daniel R. Marburger, 1997. "Gate Revenue Sharing And Luxury Taxes In Professional Sports," Contemporary Economic Policy, Western Economic Association International, Western Economic Association International, vol. 15(2), pages 114-123, 04.
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