We analyze the distribution of broadcasting revenues by sports leagues. In the context of an isolated league, we show that when the teams engage in competitive bidding to attract talent, the league's optimal choice is full revenue sharing (resulting in full competitive balance) even if the revenues are independent of the level of balancedness. This result is overturned when the league has no monopsony power in the talent market. When the teams of two different leagues bid for talent, the equilibrium level of revenue sharing is bounded away from the full sharing of revenues: leagues choose a performance-based reward scheme. Finally, we argue that our model explains the observed differences in revenue sharing rules used by the U.S. sports leagues (full revenue sharing) and European soccer leagues (performance-based reward).
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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number
110.
References listed on IDEAS 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.:
Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996.
"How (Not) to Sell Nuclear Weapons,"
American Economic Review,
American Economic Association, vol. 86(4), pages 814-29, September.
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