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Aggregative Contests and Ex-post Heterogeneity: the Case of the UEFA Champions League

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Author Info

  • Martin Grossmann

    ()
    (Department of Business Administration, University of Zurich)

  • Andreas Hefti

    ()
    (Department of Economics, University of Zurich)

  • Markus Lang

    ()
    (Department of Business Administration, University of Zurich)

Abstract

The UEFA Champions League is an annual Pan-European football competition that takes place parallel to the domestic league competitions. The participation in the Champions League secures the teams large payments, which have steadily increased over the last decade. This paper develops a general contest model of a professional team sports league in which the winner of the domestic league competition participates in the Champions League and has the possibility to win an additional prize. Our model considers two leagues where each league is composed out of several profit-maximizing clubs. We analyze the impact of the Champions League on investment incentives, competitive balance and club profits. Our model shows that the Champions League prize and domestic league prize have differential effects on competitive balance: an increase in the Champions League prize decreases competitive balance, while an increase in the domestic league prize increases competitive balance.

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Bibliographic Info

Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Working Papers with number 0161.

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Length: 39 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:iso:wpaper:0161

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Keywords: Aggregative game; contest; heterogeneity; team sports league;

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References

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  1. Helmut M. Dietl & Markus Lang, 2008. "The Effect Of Gate Revenue Sharing On Social Welfare," Contemporary Economic Policy, Western Economic Association International, vol. 26(3), pages 448-459, 07.
  2. Helmut Dietl & Markus Lang & Alexander Rathke, 2009. "The Combined Effect of Salary Restrictions and Revenue Sharing in Sports Leagues," Working Papers 0102, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Jan 2010.
  3. Helmut Dietl & Markus Lang & Alexander Rathke, 2007. "The Effect of Salary Caps in Professional Team Sports on Social Welfare," Working Papers 0016, University of Zurich, Center for Research in Sports Administration (CRSA).
  4. Martin Grossmann & Helmut Dietl & Markus Lang, 2007. "Revenue Sharing and Competitive Balance in a Dynamic Contest Model," Working Papers 0070, University of Zurich, Institute for Strategy and Business Economics (ISU), revised May 2009.
  5. Gradstein, Mark & Konrad, Kai A, 1999. "Orchestrating Rent Seeking Contests," Economic Journal, Royal Economic Society, vol. 109(458), pages 536-45, October.
  6. Martin Grossmann & Markus Lang & Philipp Theiler, 2010. "The Sugar Daddy's Game: How Wealthy Investors Change Competition in Professional Team Sports," Working Papers 0128, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Oct 2010.
  7. Kesenne, Stefan, 2000. "The Impact of Salary Caps in Professional Team Sports," Scottish Journal of Political Economy, Scottish Economic Society, vol. 47(4), pages 422-30, September.
  8. Helmut Dietl & Egon Franck & Markus Lang & Alexander Rathke, 2008. "Salary Cap Regulation in Professional Team Sports," Working Papers 0086, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Nov 2010.
  9. KÉSENNE, Stefan, . "Revenue sharing and competitive balance in professional team sports," Working Papers 1999019, University of Antwerp, Faculty of Applied Economics.
  10. Rick Harbaugh & Tilman Klumpp, 2005. "Early Round Upsets and Championship Blowouts," Economic Inquiry, Western Economic Association International, vol. 43(2), pages 316-329, April.
  11. Corchon, Luis C., 1994. "Comparative statics for aggregative games the strong concavity case," Mathematical Social Sciences, Elsevier, vol. 28(3), pages 151-165, December.
  12. SZYMANSKI, Stefan & KÉSENNE, Stefan, 2003. "Competitive balance and gate revenue sharing in team sports," Working Papers 2003003, University of Antwerp, Faculty of Applied Economics.
  13. Christian Riis & Derek J. Clark, 1997. "Contest success functions: an extension," Economic Theory, Springer, vol. 11(1), pages 201-204.
  14. Carlos Alós-Ferrer & Ana Ania, 2005. "The evolutionary stability of perfectly competitive behavior," Economic Theory, Springer, vol. 26(3), pages 497-516, October.
  15. Andreas Hefti, 2011. "On uniqueness and stability of symmetric equilibria in differentiable symmetric games," ECON - Working Papers 018, Department of Economics - University of Zurich.
  16. Tim Pawlowski & Christoph Breuer & Arnd Hovemann, 2010. "Top Clubs' Performance and the Competitive Situation in European Domestic Football Competitions," Journal of Sports Economics, , vol. 11(2), pages 186-202, April.
  17. Groh, Christian & Moldovanu, Benny & Sela, Aner & Sunde, Uwe, 2012. "Optimal seedings in elimination tournaments," Munich Reprints in Economics 20441, University of Munich, Department of Economics.
  18. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
  19. Klumpp, Tilman & Polborn, Mattias K., 2006. "Primaries and the New Hampshire Effect," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1073-1114, August.
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