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Rottenberg and the Economics of Sport after 50 Years: An Evaluation

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  • Sloane, Peter J.

    ()
    (Swansea University)

Abstract

Simon Rottenberg’s seminal 1956 article in the Journal of Political Economy, 1956, is generally accepted as the starting point for the development of the economics of sport. While he recognised that certain features of professional sports leagues were unusual he saw little reason to treat this industry any differently from a conventional industry. He discusses the importance of uncertainty of outcome, the monopsonistic nature of the labour market, the nature of the product and demand (attendances). He considers alternatives to the reserve clause, such as equal revenue sharing, maximum salary limits, equal market franchise distribution and roster limits. Each of these is rejected in favour of a free market solution which, on the basis of the invariance principle, he suggests will perform just as well as the reserve clause in allocating talent to where it is most productive. The ensuing literature has focused on all these issues, many of which have created considerable debate amongst sports economists. In particular the assumption of profit maximisation has been challenged and a divergence of views, reflected in the so-called North American and European models of sports leagues has emerged. Over the last 50 years sports leagues have expanded, TV markets have opened up and legal challenges to existing practices have multiplied. This paper seeks to evaluate Rottenberg’s contribution to a rapidly expanding field and to judge its relevance today.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2175.

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Length: 25 pages
Date of creation: Jun 2006
Date of revision:
Publication status: published in Rodriguez P., Kesenne S. and Garcia J (eds.), Sports Economics after Fifty Years: Essays in Honour of Simon Rottenberg, University of Oviedo Press: 2006
Handle: RePEc:iza:izadps:dp2175

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Keywords: monopsony; monopoly power; sport;

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  1. Americans are right - soccer is a ridiculous game
    by YouNotSneaky! in YouNotSneaky on 2008-06-12 21:35:00
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Cited by:
  1. Oliver Budzinski & Janina Satzer, 2009. "Sports Business and the Theory of Multisided Markets," Working Papers 85/09, University of Southern Denmark, Department of Environmental and Business Economics.
  2. Cornelissen, Thomas & Pfeifer, Christian, 2007. "The Impact of Participation in Sports on Educational Attainment: New Evidence from Germany," IZA Discussion Papers 3160, Institute for the Study of Labor (IZA).
  3. Martin Grossmann & Helmut Dietl & Markus Lang, 2010. "Revenue Sharing and Competitive Balance in a Dynamic Contest Model," Review of Industrial Organization, Springer, vol. 36(1), pages 17-36, February.
  4. Raul Caruso & Ilaria Verri, 2009. "Competitive Balance dopo la sentenza Bosman: il caso della pallavolo in Italia," Rivista di Diritto ed Economia dello Sport, Centro di diritto e business dello Sport, vol. 5(1), pages 59-79, Maggio.
  5. Marco Di Domizio & Mattia Palombini, 2011. "Competitività orizzontale e verticale nel ciclismo professionistico: alcune riflessioni sul circuito pro tour," Rivista di Diritto ed Economia dello Sport, Centro di diritto e business dello Sport, vol. 6(3), pages 35-54, Febbraio.
  6. Roger Noll, 2006. "Sports Economics at Fifty," Discussion Papers 06-011, Stanford Institute for Economic Policy Research.
  7. Oliver Budzinski & Janina Satzer, 2011. "Sports Business and Multisided Markets: Towards a New Analytical Framework? (Long Version)," Working Papers 1104, International Association of Sports Economists & North American Association of Sports Economists.
  8. P. Dorian Owen, 2013. "Measurement of Competitive Balance and Uncertainty of Outcome," Working Papers 1311, University of Otago, Department of Economics, revised Aug 2013.
  9. Rooth, Dan-Olof, 2010. "Work Out or Out of Work: The Labor Market Return to Physical Fitness and Leisure Sport Activities," IZA Discussion Papers 4684, Institute for the Study of Labor (IZA).
  10. 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.

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