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Revenue Sharing, Competitive Balance and the Contest Success Function

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  • Marco Runkel

    ()
    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

Abstract

This paper investigates revenue sharing in an asymmetric two team contest model of a sports league with Nash behavior of team owners. The innovation of the analysis is that it focuses on the role of the contest success function (CSF). In case of an inelastic talent supply, revenue sharing turns out to worsen competitive balance regardless of the shape of the CSF. For the case of an elastic talent supply, in contrast, the effect of revenue sharing on competitive balance depends on the specification of the CSF. We fully characterize the class of CSFs for which revenue sharing leaves unaltered competitive balance and identify CSFs ensuring that revenue sharing renders the contest closer.

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File URL: http://www.ww.uni-magdeburg.de/fwwdeka/femm/a2008_Dateien/2008_12.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 08012.

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Length: 21 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:mag:wpaper:08012

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Keywords: Revenue Sharing; Competitive Balance; Contest Success Function;

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References

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  1. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, Elsevier.
  2. Marco Runkel, 2006. "Optimal contest design, closeness and the contest success function," Public Choice, Springer, vol. 129(1), pages 217-231, October.
  3. Yiquan Gu & Tobias Wenzel, 2007. "A Note on the Excess Entry Theorem in Spatial Models with Elastic Demand," Ruhr Economic Papers 0033, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
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Cited by:
  1. Jörg Franke & Christian Kanzow & Wolfgang Leininger & Alexandra Schwartz, 2013. "Effort maximization in asymmetric contest games with heterogeneous contestants," Economic Theory, Springer, vol. 52(2), pages 589-630, March.

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