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Inter-league competition for talent vs. competitive balance

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  • Frederic Palomino
  • Jozsef Sakovics

    ()

Abstract

We analyze the distribution of broadcasting revenues by sports leagues. We show that when the teams engage in competitive bidding to attract talent in an isolated league, the league’s optimal choice is full revenue sharing (resulting in full competitive balance). In contrast, when the teams of several leagues bid for talent, in equilibrium the leagues choose a performance-based reward scheme. We thus provide an explanation for the differences in revenue sharing rules for national TV rights used by the U.S. sports leagues (full revenue sharing) and European football leagues (performance-based reward).

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Bibliographic Info

Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 96.

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Length: 23
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:edn:esedps:96

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Keywords: Sports league; revenue sharing; competitive balance.;

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References

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  11. Frederic Palomino, 2000. "Competitive Balance vs. Incentives to Win: A Theoretical Analysis of Revenue Sharing," Econometric Society World Congress 2000 Contributed Papers 0930, Econometric Society.
  12. Scott E. Atkinson & Linda R. Stanley & John Tschirhart, 1988. "Revenue Sharing as an Incentive in an Agency Problem: An example from the National Football League," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 27-43, Spring.
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Citations

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Cited by:
  1. Pelnar, Gregory, 2007. "Antitrust Analysis of Sports Leagues," MPRA Paper 5382, University Library of Munich, Germany.
  2. Gianni De Fraja, 2011. "A Theoretical Analysis of Public Funding for Research," Discussion Papers in Economics 11/31, Department of Economics, University of Leicester, revised Jun 2011.
  3. Peeters, Thomas, 2012. "Media revenue sharing as a coordination device in sports leagues," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 153-163.
  4. Palomino, F.A. & Renneboog, L.D.R. & Zhang, C., 2005. "Stock Price Reactions to Short-Lived Public Information: The Case of Betting Odds," Discussion Paper 2005-62, Tilburg University, Center for Economic Research.
  5. Harrie A. A Verbon, 2007. "Migrating Football Players, Transfer Fees and Migration Controls," CESifo Working Paper Series 2004, CESifo Group Munich.
  6. PEETERS, Thomas, 2011. "Optimal gate revenue sharing in sports leagues," Working Papers 2011015, University of Antwerp, Faculty of Applied Economics.
  7. Vincent Hogan & Patrick Massey & Shane Massey, 2012. "Analysing Determinants of Match Attendance in the European Rugby Cup," Working Papers 201228, School Of Economics, University College Dublin.
  8. 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.
  9. Sami Dakhlia & Paul Pecorino, 2006. "Rent-seeking with scarce talent: A model of preemptive hiring," Public Choice, Springer, vol. 129(3), pages 475-486, December.
  10. Palomino, F.A. & Renneboog, L.D.R. & Zhang, C., 2008. "Information Salience, Investor Sentiment, and Stock Returns: The Case of British Soccer Betting," Discussion Paper 2008-044, Tilburg University, Tilburg Law and Economic Center.
  11. Jan Šíma & Jan Procházka, 2011. "Compared Competitive Balance Evolution in the Dutch and the Czech Football Leagues between 1970 and 2010," Ekonomika a Management, University of Economics, Prague, vol. 2011(2).

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