Competitive Balance and Revenue Sharing in Sports Leagues with Utility-Maximizing Teams
AbstractThis paper develops a contest model of a professional sports league in which clubs maximize a weighted sum of profits and wins (utility maximization). The model analyzes how more win-oriented behavior of certain clubs affects talent investments, competitive balance and club profits. Moreover, in contrast to traditional models, we show that revenue sharing does not always reduce investment incentives due to the dulling effect. We identify a new effect of revenue sharing called the "sharpening effect". In the presence of the sharpening effect (dulling effect), revenue sharing enhances (reduces) investment incentives and improves (deteriorates) competitive balance in the league.
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Bibliographic InfoPaper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Working Papers with number 0118.
Length: 26 pages
Date of creation: Dec 2009
Date of revision: Jun 2010
Competitive balance; contest; invariance proposition; objective function; revenue sharing; team sports league; utility maximization;
Other versions of this item:
- Helmut M. Dietl & Martin Grossmann & Markus Lang, 2011. "Competitive Balance and Revenue Sharing in Sports Leagues With Utility-Maximizing Teams," Journal of Sports Economics, , vol. 12(3), pages 284-308, June.
- Helmut Dietl & Martin Grossmann & Markus Lang, 2009. "Competitive Balance and Revenue Sharing in Sports Leagues with Utility-Maximizing Teams," Working Papers 0033, University of Zurich, Center for Research in Sports Administration (CRSA), revised Jun 2010.
- Helmut Dietl & Martin Grossmann & Markus Lang, 2010. "Competitive Balance and Revenue Sharing in Sports Leagues with Utility-Maximizing Teams," Working Papers 1006, International Association of Sports Economists & North American Association of Sports Economists.
- L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Recreation; Tourism
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-11 (All new papers)
- NEP-MIC-2009-12-11 (Microeconomics)
- NEP-SPO-2009-12-11 (Sports & Economics)
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- Helmut Dietl & Rodney Fort & Markus Lang, 2011.
"International Sports League Comparisons,"
0144, University of Zurich, Institute for Strategy and Business Economics (ISU).
- Halicioglu, Ferda, 2012. "An empirical study of relationship between FIFA world ranking and domestic football competition level: the case of Turkey," MPRA Paper 35662, University Library of Munich, Germany.
- Martin Grossmann, 2011.
"Evolutionarily Stable Strategies in Sports Contests,"
0149, University of Zurich, Institute for Strategy and Business Economics (ISU).
- Martin Grossmann, 2011. "Evolutionarily Stable Strategies in Sports Contests," Working Papers 0044, University of Zurich, Center for Research in Sports Administration (CRSA).
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