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Revenue Sharing as an Incentive in an Agency Problem: An example from the National Football League

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Author Info
Scott E. Atkinson
Linda R. Stanley
John Tschirhart
Abstract

We consider a professional sports league's use of a well-defined incentive mechanism, revenue sharing, to encourage the desired behavior of teams in the league. The incentive mechanism works by internalizing externalities that arise across agents (the team owners). We find revenue sharing to be a potentially powerful incentive scheme because in this setting it encourages an optimal distribution of resources among agents. Its effectiveness is mitigated, however, by agents who enjoy private, nonmonetary benefits that are not shared. Using data from the National Football League, we examine how well the propositions explain observed behavior in this relationship.

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File URL: http://links.jstor.org/sici?sici=0741-6261%28198821%2919%3A1%3C27%3ARSAAII%3E2.0.CO%3B2-1&origin=repec
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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 19 (1988)
Issue (Month): 1 (Spring)
Pages: 27-43
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Handle: RePEc:rje:randje:v:19:y:1988:i:spring:p:27-43

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  1. Anne Chwolka & Dirk Simons, 2003. "Impacts of revenue sharing, profit sharing and transfer pricing on quality-improving investments," European Accounting Review, Taylor and Francis Journals, vol. 12(1), pages 47-76, May. [Downloadable!] (restricted)
  2. Frederic Palomino & Luca Rigotti, 2000. "The Sport League's Dilemma: Competitive Balance versus Incentives to Win," Department of Economics, Working Paper Series 1021, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
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  3. Martin Grossmann & Helmut Dietl & Markus Lang, 2007. "Revenue Sharing and Competitive Balance in a Dynamic Contest Model," Working Papers 0070, University of Zurich, Institute for Strategy and Business Economics (ISU), revised May 2009. [Downloadable!]
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  4. Stephen Easton & Duane Rockerbie, 2003. "Revenue Sharing, Conjectures, and Scarce Talent in a Model of a Professional Sports League," Industrial Organization 0303010, EconWPA. [Downloadable!]
  5. Joel G. Maxcy, 2006. "Revenue Sharing in MLB: The Effect on Player Transfers," Working Papers 0615, International Association of Sports Economists. [Downloadable!]
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  6. Helmut Dietl & Egon Franck & Tariq Hasan & Markus Lang, 2006. "Governance of Professional Sports Leagues - Cooperatives versus Contracts," Working Papers 0059, University of Zurich, Institute for Strategy and Business Economics (ISU), revised 2007. [Downloadable!]
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  7. Victor Matheson & Robert Baade, 2006. "Research Note: Assessing Household Service Losses with Joint Survival Probabilities," Working Papers 0611, College of the Holy Cross, Department of Economics. [Downloadable!]
  8. Falconieri, S. & Palomino, F. & Sakovics, J., 2002. "Collective vs. individual sale of tv rights in league sports," Discussion Paper 106, Tilburg University, Center for Economic Research. [Downloadable!]
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  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). [Downloadable!]
  10. José M. Sánchez Santos & Pablo Castellanos García & Jesus A. Dopico Castro, 2006. "The production process in basketball: Empirical evidence from Spanish league," IASE Conference Papers 0628, International Association of Sports Economists. [Downloadable!]
  11. Pedro Garcia-del-Barrio & Stefan Szymanski, 2009. "Goal! Profit Maximization Versus Win Maximization in Soccer," Review of Industrial Organization, Springer, vol. 34(1), pages 45-68, February. [Downloadable!] (restricted)
  12. Fiona Carmichael & Dennis Thomas & Robert Ward, 2000. "Team performance: the case of English Premiership football," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 21(1), pages 31-45.
  13. Lawrence Hadley & Marc Poitras & John Ruggiero & Scott Knowles, 2000. "Performance evaluation of National Football League teams," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 21(2), pages 63-70.
  14. Helmut Dietl & Egon Franck & Markus Lang & Alexander Rathke, 2008. "Revenue Sharing, Reserve Clause and Salary Caps in Professional Team Sports Leagues," Working Papers 0100, University of Zurich, Institute for Strategy and Business Economics (ISU), revised 2009. [Downloadable!]
  15. José M. Sánchez Santos & Pablo Castellanos García & Jesus A. Dopico Castro, 2006. "The production process in basketball: Empirical evidence from Spanish league," Working Papers 0611, International Association of Sports Economists. [Downloadable!]
  16. Philippe Cyrenne, 2009. "Modelling Professional Sports Leagues: An Industrial Organization Approach," Review of Industrial Organization, Springer, vol. 34(3), pages 193-215, May. [Downloadable!] (restricted)
  17. Katsushi Imai & Raghav Gaiha & Ganesh Thapa, 2008. "Food and oil prices," The School of Economics Discussion Paper Series 0801, Economics, The University of Manchester. [Downloadable!]
  18. Frederic Palomino & Jozsef Sakovics, 2004. "Inter-league competition for talent vs. competitive balance," ESE Discussion Papers 96, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
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  19. Helmut Dietl & Markus Lang & Alexander Rathke, 2009. "The Combined Effect of Salary Restrictions and Revenue Sharing on Club Profits, Player Salaries, and Competitive Balance," Working Papers 0102, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Jul 2009. [Downloadable!]
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  20. Paul Madden, 2008. "Price, quality and welfare consequences of alternative club objectives in a professional sport league," The School of Economics Discussion Paper Series 0802, Economics, The University of Manchester. [Downloadable!]
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