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The Control of Externalities in Sports Leagues: An Analysis of Restrictions in the National Hockey League

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Author Info

  • Dennis W. Carlton
  • Alan S. Frankel
  • Elisabeth M. Landes

Abstract

This paper provides one of the few successful demonstrations of the efficiency of certain types of restrictions in the context of a joint venture. The joint venture we examine is the National Hockey League (NHL) in the 1980s, which was then composed of 21 separately owned teams. (It now has 30 teams.) The restriction we analyze is the NHL rule on franchise relocation. Before one can fully understand the effect of the restriction, one must understand the theory of how sports leagues operate and whether sports leagues have any market power that can be enhanced by such a restriction. After providing such a theory, we empirically test the effect of the NHL restriction on franchise relocation. Aside from data availability, the advantage of our time period is that television was then an unimportant source of revenue for the NHL. Thus we are able to isolate a particular externality arising from how the NHL finances teams.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 112 (2004)
Issue (Month): S1 (February)
Pages: S268-S288

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Handle: RePEc:ucp:jpolec:v:112:y:2004:i:s1:p:s268-s288

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Web page: http://www.journals.uchicago.edu/JPE/

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Cited by:
  1. Franc J.G.M. Klaasen & Jan R. Magnus, 2006. "Are Economic Agents Successful Optimizers? An Analysis through Service Strategy in Tennis," Tinbergen Institute Discussion Papers 06-048/2, Tinbergen Institute.
  2. John C. Leadley & Zenon X. Zygmont, 2006. "When Is the Honeymoon Over? National Hockey League Attendance, 1970­2003," Canadian Public Policy, University of Toronto Press, vol. 32(2), pages 213-232, June.
  3. Klaassen, F.J.G.M. & Magnus, J.R., 2006. "Are Economic Agents Successful Optimizers? An Analysis Through Strategy in Tennis," Discussion Paper 2006-52, Tilburg University, Center for Economic Research.
  4. Pelnar, Gregory, 2007. "Antitrust Analysis of Sports Leagues," MPRA Paper 5382, University Library of Munich, Germany.
  5. Klaassen, Franc J.G.M. & Magnus, Jan R., 2009. "The efficiency of top agents: An analysis through service strategy in tennis," Journal of Econometrics, Elsevier, vol. 148(1), pages 72-85, January.
  6. Dennis W. Carlton & Randal C. Picker, 2007. "Antitrust and Regulation," NBER Working Papers 12902, National Bureau of Economic Research, Inc.
    • Dennis W. Carlton & Randal C. Picker, 2013. "Antitrust and Regulation," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned? National Bureau of Economic Research, Inc.
  7. Daniel, Rascher, 2008. "Franchise Relocations, Expansions, and Mergers in Professional Sports Leagues," MPRA Paper 25809, University Library of Munich, Germany.

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