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Free Agent Auctions and Revenue Sharing: A Simple Approach

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  • Rockerbie, Duane

Abstract

This paper uses a simple approach to address the issue of how revenue sharing in professional sports leagues can affect the allocation of free agent players to teams. To affect the allocation of free agents, the imposition of revenue sharing must alter the ranking of bidding teams in terms of maximum salary offers. Two types of revenue sharing systems are considered: traditional gate revenue sharing and pooled revenue sharing. The paper suggests that team rankings for ability to pay are not affected by pooled revenue sharing, however the distribution of player salaries will be compressed. Traditional gate revenue sharing can alter the ability to pay rankings for teams, depending upon playing schedules and the closeness of revenues between closely ranked teams.

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File URL: http://mpra.ub.uni-muenchen.de/2218/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2218.

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Date of creation: Mar 2007
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Handle: RePEc:pra:mprapa:2218

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Keywords: revenue sharing; professional sports; free agents; labor surplus; auction;

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  1. Phillip Miller, 2006. "Revenue Sharing in Sports Leagues: The Effects on Talent Distribution and Competitive Balance," Working Papers 0627, International Association of Sports Economists & North American Association of Sports Economists.
  2. 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..
  3. Stefan Kesenne, 2000. "Revenue Sharing and Competitive Balance in Professional Team Sports," Journal of Sports Economics, , vol. 1(1), pages 56-65, February.
  4. Daniel R. Marburger, 1997. "Gate Revenue Sharing And Luxury Taxes In Professional Sports," Contemporary Economic Policy, Western Economic Association International, vol. 15(2), pages 114-123, 04.
  5. Rodney Fort & James Quirk, 1995. "Cross-subsidization, Incentives, and Outcomes in Professional Team Sports Leagues," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1265-1299, September.
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