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Losing money to make money: The benefits of redistribution in collective bargaining in sports

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  • Vohra, Akhil

Abstract

I develop a model of majority-rule collective bargaining between a sports league and its players when delay costs incurred by players are wealth-dependent. I propose a refinement of subgame perfect equilibrium that requires equilibrium strategies to be immune to deviations by any majority subgroup. I show this is equivalent to giving the player with median bargaining power the unilateral ability to negotiate with the league. Using this model, I demonstrate that policies reallocating surplus from high-talent to moderate-talent players, such as maximum contracts in professional sports, can improve the welfare of all players. Redistribution of surplus harmonizes players' interests, giving a majority of them a greater stake in the bargaining outcome. The model highlights the gains to be had if a heterogeneous group agrees to concessions that increase the alignment of their individual interests.

Suggested Citation

  • Vohra, Akhil, 2023. "Losing money to make money: The benefits of redistribution in collective bargaining in sports," Games and Economic Behavior, Elsevier, vol. 142(C), pages 226-242.
    • Handle: RePEc:eee:gamebe:v:142:y:2023:i:c:p:226-242
    DOI: 10.1016/j.geb.2023.08.006
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    More about this item

    Keywords

    Majority-rule bargaining; Collective bargaining; Negotiation; Unions;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • Z22 - Other Special Topics - - Sports Economics - - - Labor Issues

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