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Inter-league competition for talent vs. competitive balance

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  • Palomino, Frederic
  • Sakovics, Jozsef

Abstract

We analyze the distribution of broadcasting revenues by sports leagues. We show that when the teams engage in competitive bidding to attract talent in an isolated league, the league’s optimal choice is full revenue sharing (resulting in full competitive balance). In contrast, when the teams of several leagues bid for talent, in equilibrium the leagues choose a performance-based reward scheme. We thus provide an explanation for the differences in revenue sharing rules for national TV rights used by the U.S. sports leagues (full revenue sharing) and European football leagues (performance-based reward).

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 22 (2004)
Issue (Month): 6 (June)
Pages: 783-797

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Handle: RePEc:eee:indorg:v:22:y:2004:i:6:p:783-797

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Web page: http://www.elsevier.com/locate/inca/505551

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  1. Thomas Hoehn & Stefan Szymanski, 1999. "The Americanization of European football," Economic Policy, CEPR & CES & MSH, vol. 14(28), pages 203-240, 04.
  2. Robin Naylor & Michele Santoni, 2003. "Foreign direct investment and wage bargaining," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 12(1), pages 1-18.
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  5. Frederic Palomino, 2000. "Competitive Balance vs. Incentives to Win: A Theoretical Analysis of Revenue Sharing," Econometric Society World Congress 2000 Contributed Papers 0930, Econometric Society.
  6. Prat, A. & Rustichini, A., 1999. "Games Played Through Agents," Discussion Paper 1999-68, Tilburg University, Center for Economic Research.
  7. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December.
  8. Scully, Gerald W., 1995. "The Market Structure of Sports," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226743950.
  9. Cave, Martin & Crandall, Robert W, 2001. "Sports Rights and the Broadcast Industry," Economic Journal, Royal Economic Society, vol. 111(469), pages F4-26, February.
  10. El-Hodiri, Mohamed & Quirk, James, 1971. "An Economic Model of a Professional Sports League," Journal of Political Economy, University of Chicago Press, vol. 79(6), pages 1302-19, Nov.-Dec..
  11. Frederic Palomino & Jozsef Sakovics, 2004. "Revenue sharing in professional sports leagues: for the sake of competitive balance or as a result of monopsony power?," ESE Discussion Papers 59, Edinburgh School of Economics, University of Edinburgh.
  12. Rodney Fort & James Quirk, 1995. "Cross-subsidization, Incentives, and Outcomes in Professional Team Sports Leagues," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1265-1299, September.
  13. Flynn, Michael A & Gilbert, Richard J, 2001. "The Analysis of Professional Sports Leagues as Joint Ventures," Economic Journal, Royal Economic Society, vol. 111(469), pages F27-46, February.
  14. Whitney, James D, 1993. "Bidding Till Bankrupt: Destructive Competition in Professional Team Sports," Economic Inquiry, Western Economic Association International, vol. 31(1), pages 100-115, January.
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Citations

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Cited by:
  1. Sonia Falconieri & Frederic Palomino & Jozsef Sakovics, 2004. "Collective vs. Individual Sale of TV Rights in League Sports," ESE Discussion Papers 85, Edinburgh School of Economics, University of Edinburgh.
  2. Gianni De Fraja, 2011. "A Theoretical Analysis of Public Funding for Research," Discussion Papers in Economics 11/31, Department of Economics, University of Leicester, revised Jun 2011.
  3. Palomino, F.A. & Renneboog, L.D.R. & Zhang, C., 2008. "Information Salience, Investor Sentiment, and Stock Returns: The Case of British Soccer Betting," Discussion Paper 2008-044, Tilburg University, Tilburg Law and Economic Center.
  4. Vincent Hogan & Patrick Massey & Shane Massey, 2012. "Analysing Determinants of Match Attendance in the European Rugby Cup," Working Papers 201228, School Of Economics, University College Dublin.
  5. Peeters, Thomas, 2012. "Media revenue sharing as a coordination device in sports leagues," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 153-163.
  6. Palomino, F.A. & Renneboog, L.D.R. & Zhang, C., 2005. "Stock Price Reactions to Short-Lived Public Information: The Case of Betting Odds," Discussion Paper 2005-016, Tilburg University, Tilburg Law and Economic Center.
  7. Harrie A. A Verbon, 2007. "Migrating Football Players, Transfer Fees and Migration Controls," CESifo Working Paper Series 2004, CESifo Group Munich.
  8. Paul Madden, 2010. "Gametheoretic analysis of basic team sports leagues," The School of Economics Discussion Paper Series 1006, Economics, The University of Manchester.
  9. Jan Šíma & Jan Procházka, 2011. "Compared Competitive Balance Evolution in the Dutch and the Czech Football Leagues between 1970 and 2010," Ekonomika a Management, University of Economics, Prague, vol. 2011(2).
  10. Pelnar, Gregory, 2007. "Antitrust Analysis of Sports Leagues," MPRA Paper 5382, University Library of Munich, Germany.
  11. Sami Dakhlia & Paul Pecorino, 2005. "Rent-seeking with scarce talent: a model of preemptive hiring," Microeconomics 0505002, EconWPA.
  12. Paul Madden & Mario Pezzino, 2013. "Sports League Quality, Broadcaster TV Rights Bids and Wholesale Regulation of Sports Channels," The School of Economics Discussion Paper Series 1304, Economics, The University of Manchester.

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