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Revenue Sharing, Conjectures, and Scarce Talent in a Sports League Model

Author

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  • Stephen T. Easton

    (Simon Fraser University)

  • Duane W. Rockerbie

    (University of Lethbridge)

Abstract

This article develops a model of a representative professional sports club operating in a league that has the option of adopting one of two different forms of revenue sharing: traditional revenue sharing or central-pool-type revenue sharing. To adopt either form of revenue sharing, the league requires tehat a majority of clubs increase their profit with adoption of the plan. We derive necessary conditions for either plan to garner enough support for a majority vote. The likelihood of forming a majority depends on the distribution of team revenues and the conjectures on acquiring talent that clubs possess. Competitive conjectures make the adoption of revenue sharing more likely, whereas cartel conjectures make its adoption less likely. This may partly explain why salary caps and revenue sharing tend to be used together in some leagues.

Suggested Citation

  • Stephen T. Easton & Duane W. Rockerbie, 2005. "Revenue Sharing, Conjectures, and Scarce Talent in a Sports League Model," Journal of Sports Economics, , vol. 6(4), pages 359-378, November.
    • Handle: RePEc:sae:jospec:v:6:y:2005:i:4:p:359-378
    DOI: 10.1177/1527002504267520
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Philippe Cyrenne, 2009. "Modelling Professional Sports Leagues: An Industrial Organization Approach," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(3), pages 193-215, May.
    2. Thomas Peeters, 2011. "Optimal gate revenue sharing in sports leagues," Working Papers 1122, 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;The Industrial Organization Society, vol. 34(1), pages 69-80, February.
    4. Duane W. Rockerbie, 2020. "Revenue Sharing and Collusive Behavior in the Major League Baseball Posting System," Economies, MDPI, vol. 8(3), pages 1-12, September.
    5. Rockerbie, Duane & Easton, Stephen, 2017. "Risk Diversification from Revenue Sharing in a Professional Sports League: Measuring Welfare Gains," MPRA Paper 77431, University Library of Munich, Germany.
    6. Helmut Dietl & Rodney Fort & Markus Lang, 2011. "International Sports League Comparisons," Working Papers 0042, University of Zurich, Center for Research in Sports Administration (CRSA).
    7. Jason Winfree & Rodney Fort, 2012. "Nash Conjectures and Talent Supply in Sports League Modeling," Journal of Sports Economics, , vol. 13(3), pages 306-313, June.
    8. Michel Cavagnac, 2009. "Revenue Sharing and Competitive Balance When Teams are not Wage Takers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(3), pages 299-313, November.
    9. Rockerbie, Duane & Easton, Stephen, 2017. "Revenue Sharing in Professional Sports Leagues as a Hedge for Exchange Rate Risk," MPRA Paper 77428, University Library of Munich, Germany.
    10. Rockerbie, Duane, 2011. "The Invariance Proposition in Baseball: New Evidence," MPRA Paper 55020, University Library of Munich, Germany.
    11. Duane Rockerbie & Stephen Easton, 2018. "Revenue Sharing in Major League Baseball: The Moments That Meant so Much," IJFS, MDPI, vol. 6(3), pages 1-16, August.
    12. Thomas Peeters, 2015. "Profit-Maximizing Gate Revenue Sharing In Sports Leagues," Economic Inquiry, Western Economic Association International, vol. 53(2), pages 1275-1291, April.
    13. Duane W. Rockerbie & Stephen T. Easton, 2019. "Of Bricks and Bats: New Stadiums, Talent Supply, and Team Performance in Major League Baseball," Journal of Sports Economics, , vol. 20(1), pages 3-24, January.
    14. Rockerbie, Duane, 2007. "Free Agent Auctions and Revenue Sharing: A Simple Approach," MPRA Paper 2218, University Library of Munich, Germany.

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