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Inter-league competition for talent vs. competitive balance

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Author Info
Frederic Palomino
Jozsef Sakovics ()

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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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Publisher 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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Related research
Keywords: Sports league; revenue sharing; competitive balance.;

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Find related papers by JEL classification:
L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Recreation; Tourism

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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.:
  1. 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. [Downloadable!] (restricted)
  2. Andrea Prat & Aldo Rustichini, 2003. "Games Played Through Agents," Econometrica, Econometric Society, vol. 71(4), pages 989-1026, 07. [Downloadable!] (restricted)
  3. Flynn, Michael A & Gilbert, Richard J, 2001. "The Analysis of Professional Sports Leagues as Joint Ventures," Economic Journal, Royal Economic Society, vol. 111(469), pages F27-46, February. [Downloadable!] (restricted)
  4. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December. [Downloadable!] (restricted)
  5. Palomino, F. & Sakovics, J., 2000. "Revenue sharing in professional sports leagues : for the sake of competitive balance or as a result of monopsony power?," Discussion Paper 110, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  6. Robin Naylor & Michele Santoni, 2003. "Foreign direct investment and wage bargaining," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 12(1), pages 1-18, March. [Downloadable!] (restricted)
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  7. Szymanski, Stefan, 2002. "Competitive Balance and Income Redistribution in Team Sports," Royal Economic Society Annual Conference 2002 173, Royal Economic Society. [Downloadable!]
  8. 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. [Downloadable!]
  9. Thomas Hoehn & Stefan Szymanski, 1999. "The Americanization of European football," Economic Policy, CEPR, CES, MSH, vol. 14(28), pages 203-240, 04. [Downloadable!] (restricted)
  10. Philippe Jehiel & Benny Moldovanu, 2000. "Auctions with Downstream Interaction Among Buyers," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 768-791, Winter.
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  11. 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 1302-19, Nov.-Dec.. [Downloadable!] (restricted)
  12. 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. [Downloadable!] (restricted)
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  13. Whitney, James D, 1993. "Bidding Till Bankrupt: Destructive Competition in Professional Team Sports," Economic Inquiry, Oxford University Press, vol. 31(1), pages 100-115, January.
  14. Philippe Jehiel & Benny Moldovanu, 1996. "Strategic Nonparticipation," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 84-98, Spring. [Downloadable!] (restricted)
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  15. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. 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 2008-99, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  2. Palomino, F. & Renneboog, L.D.R. & Zhang, C., 2005. "Stock price reactions to short-lived public information : the case of betting odds," Discussion Paper 16, Tilburg University, Tilburg Law and Economic Center. [Downloadable!]
    Other versions:
  3. Harrie A. A Verbon, 2007. "Migrating Football Players, Transfer Fees and Migration Controls," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. Falconieri, S. & Palomino, F. & Sakovics, J., 2002. "Collective vs. individual sale of tv rights in league sports," Discussion Paper 106, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
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