The Sport League's Dilemma: Competitive Balance versus Incentives to Win
AbstractWe analyze a dynamic model of strategic interaction between a professional sport league that organizes a tournament, the teams competing to win it, and the broadcasters paying for the rights to televise it.Teams and broadcasters maximize expected profits, while the league's objective may be either to maximize the demand for the sport or to maximize the teams'joint profits.Demand depends positively on symmetry among teams (competitive balance) and how aggressively teams try to win (incentives to win).Revenue sharing increases competitive balance but decreases incentives to win.Under demand maximization, a performance-based reward scheme (used by European sport leagues) may be optimal. Under joint profit maximization, full revenue sharing (used by many US leagues) is always optimal.These results reflect institutional differences among European and American sports leagues.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2000-109.
Date of creation: 2000
Date of revision:
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Web page: http://center.uvt.nl
sport; competition; incentives; broadcasting industry; revenue sharing;
Other versions of this item:
- Palomino, Frederic & Rigotti, Luca, 2000. "The Sport League's Dilemma: Competitive Balance versus Incentives to Win," Department of Economics, Working Paper Series qt2w3284jj, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Frederic Palomino and Luca Rigotti., 2000. "The Sport League's Dilemma: Competitive Balance versus Incentives to Win," Economics Working Papers E00-292, University of California at Berkeley.
- Frederic Palomino & Luca Rigotti, 2001. "The Sport League's Dilemma: Competitive Balance versus Incentives to Win," Industrial Organization 0012003, EconWPA.
- L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
- L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Recreation; Tourism
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Frederic Palomino & Jozsef Sakovics, 2004.
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ESE Discussion Papers
59, Edinburgh School of Economics, University of Edinburgh.
- Palomino, F.A. & Sakovics, J., 2000. "Revenue Sharing in Professional Sports Leagues: For the Sake of Competitive Balance or as a Result of Monopsony Power?," Discussion Paper 2000-110, Tilburg University, Center for Economic Research.
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- Sonia Falconieri & Frederic Palomino & Jozsef Sakovics, 2004.
"Collective vs. Individual Sale of TV Rights in League Sports,"
ESE Discussion Papers
85, Edinburgh School of Economics, University of Edinburgh.
- Falconieri, S. & Palomino, F.A. & Sakovics, J., 2002. "Collective vs Individual Sale of TV Rights in League Sports," Discussion Paper 2002-106, Tilburg University, Center for Economic Research.
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- Michel Cavagnac, 2009. "Revenue Sharing and Competitive Balance When Teams are not Wage Takers," Review of Industrial Organization, Springer, vol. 35(3), pages 299-313, November.
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