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Revenue Sharing in Sports Leagues

Author

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  • Phillip A. Miller

    (Minnesota State University, Mankato)

Abstract

This article uses a three-stage model of noncooperative and cooperative bargaining in a free agent market to analyze the effect of revenue sharing on the decision of teams to sign a free agent. The authors argue that in all subgame perfect Nash equilibria, the team with the highest reservation price will get the player, that revenue sharing will not alter the outcome of the game unless the proportion taken from high revenue teams is sufficiently high, that a revenue-sharing system that rewards quality low-revenue teams can alter the outcome of the game while requiring a lower proportion to be taken from high-revenue teams, and that the revenue-sharing systems can improve competitive balance by redistributing pivotal marginal players among teams.

Suggested Citation

  • Phillip A. Miller, 2007. "Revenue Sharing in Sports Leagues," Journal of Sports Economics, , vol. 8(1), pages 62-82, February.
    • Handle: RePEc:sae:jospec:v:8:y:2007:i:1:p:62-82
    DOI: 10.1177/1527002505279346
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    References listed on IDEAS

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    1. 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.
    2. 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 1302-1319, Nov.-Dec..
    3. Simon Rottenberg, 1956. "The Baseball Players' Labor Market," Journal of Political Economy, University of Chicago Press, vol. 64(3), pages 242-242.
    4. Daniel Rascher, 1997. "A model of a professional sports league," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 3(3), pages 327-328, August.
    5. Stefan Kesenne, 2000. "Revenue Sharing and Competitive Balance in Professional Team Sports," Journal of Sports Economics, , vol. 1(1), pages 56-65, February.
    6. 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, April.
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    Cited by:

    1. Masaki Fujimoto, 2023. "A Dynamic Analysis of Equal Revenue Sharing and Endogenous Salary Caps in the N-Team Leagues," Journal of Sports Economics, , vol. 24(5), pages 624-638, June.

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