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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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References

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  2. 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.
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  4. 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.
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  7. Robin Naylor & Michele Santoni, 1999. "Foreign direct investment and wage bargaining," CSGR Working papers series 41/99, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
  8. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-29, September.
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  10. Jehiel, Philippe & Benny Moldovanu, 1994. "Strategic Non-Participation," Discussion Paper Serie B 287, University of Bonn, Germany.
  11. Prat, A. & Rustichini, A., 1999. "Games played through agents," Discussion Paper 1999-68, Tilburg University, Center for Economic Research.
  12. 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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  15. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December.
  16. Palomino, F.A. & Sakovics, J., 2000. "Revenue Sharing in Professional Sports Leagues: For the Sake of Competitive Balance or as a Result of Monopsony Power?," Discussion Paper 2000-110, Tilburg University, Center for Economic Research.
  17. Thomas Hoehn & Stefan Szymanski, 1999. "The Americanization of European football," Economic Policy, CEPR & CES & MSH, vol. 14(28), pages 203-240, 04.
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Citations

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Cited by:
  1. 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.
  2. 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 2005-62, Tilburg University, Center for Economic Research.
  3. Paul Madden, 2010. "Gametheoretic analysis of basic team sports leagues," The School of Economics Discussion Paper Series 1006, Economics, The University of Manchester.
  4. 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.
  5. 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.
  6. Sami Dakhlia & Paul Pecorino, 2006. "Rent-seeking with scarce talent: A model of preemptive hiring," Public Choice, Springer, vol. 129(3), pages 475-486, December.
  7. 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.
  8. Pelnar, Gregory, 2007. "Antitrust Analysis of Sports Leagues," MPRA Paper 5382, University Library of Munich, Germany.
  9. Harrie A. A Verbon, 2007. "Migrating Football Players, Transfer Fees and Migration Controls," CESifo Working Paper Series 2004, CESifo Group Munich.
  10. 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).
  11. 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.

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