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Revenue Sharing and Competitive Balance in a Dynamic Contest Model

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Author Info

  • Martin Grossmann

    ()

  • Helmut Dietl

    ()

  • Markus Lang

    ()

Abstract

This paper presents a dynamic model of talent investments in a team sports league with an infinite time horizon. We show that the clubs' investment decisions and the effects of revenue sharing on competitive balance depend on the following three factors: (i) the cost function of talent investments, (ii) the clubs' market sizes, and (iii) the initial endowments of talent stock. We analyze how these factors interact in the transition to the steady state as well as in the steady state itself.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s11151-009-9236-x
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Bibliographic Info

Article provided by Springer in its journal Review of Industrial Organization.

Volume (Year): 36 (2010)
Issue (Month): 1 (February)
Pages: 17-36

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Handle: RePEc:kap:revind:v:36:y:2010:i:1:p:17-36

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Web page: http://www.springerlink.com/link.asp?id=100336

Related research

Keywords: Competitive balance; Contests; Revenue sharing; Sports economics;

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References

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  1. Helmut M. Dietl & Egon Franck & Markus Lang, 2008. "Overinvestment In Team Sports Leagues: A Contest Theory Model," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(3), pages 353-368, 07.
  2. Peter Sloane, 2006. "Rottenberg and the Economics of Sport after 50 years: An Evaluation," Working Papers 0608, International Association of Sports Economists & North American Association of Sports Economists.
  3. Rodney Fort & Jason Winfree, 2009. "Sports Really are Different: The Contest Success Function and the Supply of Talent," Review of Industrial Organization, Springer, vol. 34(1), pages 69-80, February.
  4. Helmut Dietl & Markus Lang & Stephan Werner, 2008. "Social Welfare in Sports Leagues with Profit-Maximizing and/or Win-Maximizing Clubs," Working Papers 0826, International Association of Sports Economists & North American Association of Sports Economists.
  5. Helmut Dietl & Markus Lang, 2006. "The Effect of Gate Revenue-Sharing on Social Welfare," Working Papers 0012, University of Zurich, Center for Research in Sports Administration (CRSA), revised 2007.
  6. Thomas Hoehn & Stefan Szymanski, 1999. "The Americanization of European football," Economic Policy, CEPR & CES & MSH, vol. 14(28), pages 203-240, 04.
  7. Philippe Cyrenne, 2009. "Modelling Professional Sports Leagues: An Industrial Organization Approach," Review of Industrial Organization, Springer, vol. 34(3), pages 193-215, May.
  8. Christian Riis & Derek J. Clark, 1997. "Contest success functions: an extension," Economic Theory, Springer, vol. 11(1), pages 201-204.
  9. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer, vol. 7(2), pages 283-290.
  10. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  11. Daniel R. Marburger, 1997. "Gate Revenue Sharing And Luxury Taxes In Professional Sports," Contemporary Economic Policy, Western Economic Association International, vol. 15(2), pages 114-123, 04.
  12. Stefan Szymanski & Stefan KÈsenne, 2004. "Competitive balance and gate revenue sharing in team sports," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 165-177, 03.
  13. Martin Grossmann & Helmut M. Dietl, 2009. "Investment Behaviour in a Two-Period Contest Model," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(3), pages 401-417, September.
  14. 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.
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  16. Dixit, Avinash K, 1987. "Strategic Behavior in Contests," American Economic Review, American Economic Association, vol. 77(5), pages 891-98, December.
  17. 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..
  18. Stefan Szymanski, 2003. "The Economic Design of Sporting Contests," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1137-1187, December.
  19. Young Lee & Rodney Fort, 2008. "Attendance and the Uncertainty-of-Outcome Hypothesis in Baseball," Review of Industrial Organization, Springer, vol. 33(4), pages 281-295, December.
  20. John Vrooman, 2007. "Theory Of The Beautiful Game: The Unification Of European Football," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(3), pages 314-354, 07.
  21. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July.
  22. Stefan Kesenne, 2000. "Revenue Sharing and Competitive Balance in Professional Team Sports," Journal of Sports Economics, , vol. 1(1), pages 56-65, February.
  23. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  24. Rodney Fort & James Quirk, 2007. "Rational Expectations And Pro Sports Leagues," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(3), pages 374-387, 07.
  25. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
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Citations

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Cited by:
  1. Oliver Guertler & Markus Lang & Tim Pawlowski, 2011. "On the Release of Players to National Teams," Working Papers 0047, University of Zurich, Center for Research in Sports Administration (CRSA).
  2. Che, XiaoGang & Humphreys, Brad, 2012. "Competition Between Sports Leagues: Theory and Evidence on Rival League Formation in North America," Working Papers 2012-23, University of Alberta, Department of Economics.
  3. Martin Grossmann & Markus Lang & Philipp Theiler, 2010. "The Sugar Daddy's Game: How Wealthy Investors Change Competition in Professional Team Sports," Working Papers 0037, University of Zurich, Center for Research in Sports Administration (CRSA), revised Oct 2010.
  4. Martin Grossmann, 2011. "Endogenous Liquidity Constraints in a Dynamic Contest," Working Papers 0148, University of Zurich, Institute for Strategy and Business Economics (ISU).
  5. Markus LANG & Alexander RATHKE & Marco RUNKEL, 2010. "The Economic Consequences Of Foreigner Rules In National Sports Leagues," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 31, pages 47-64.
  6. Helmut Dietl & Tobias Duschl & Markus Lang, 2010. "Gehaltsobergrenzen und Luxussteuern: Erkenntnisse aus dem professionellen Mannschaftssport," Working Papers 0136, University of Zurich, Institute for Strategy and Business Economics (ISU).
  7. Egon Franck & Markus Lang, 2013. "A Theoretical Analysis of the Influence of Money Injections on Risk Taking in Football Clubs," Working Papers 0160, University of Zurich, Institute for Strategy and Business Economics (ISU).
  8. Helmut Dietl & Egon Franck & Markus Lang & Alexander Rathke, 2010. "Organizational Differences between U.S. Major Leagues and European Leagues: Implications for Salary Caps," Working Papers 0035, University of Zurich, Center for Research in Sports Administration (CRSA).
  9. Helmut Dietl & Egon Franck & Martin Grossmann & Markus Lang, 2009. "Contest Theory and its Applications in Sports," Working Papers 0105, University of Zurich, Institute for Strategy and Business Economics (ISU).
  10. Martin Grossmann & Andreas Hefti & Markus Lang, 2012. "Aggregative Contests and Ex-post Heterogeneity: the Case of the UEFA Champions League," Working Papers 0161, University of Zurich, Institute for Strategy and Business Economics (ISU).

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