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A Contest Model of a Professional Sports League with Two-Sided Markets

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Author Info

  • Helmut Dietl

    ()
    (Institute for Strategy and Business Economics, University of Zurich)

  • Tobias Duschl

    ()
    (Institute for Strategy and Business Economics, University of Zurich)

  • Egon Franck

    ()
    (Institute for Strategy and Business Economics, University of Zurich)

  • Markus Lang

    ()
    (Institute for Strategy and Business Economics, University of Zurich)

Abstract

This paper develops a model of a professional sports league with network externalities by integrating the theory of two-sided markets into a contest model. In professional team sports, the competition of the clubs functions as a platform that enables sponsors to interact with fans. In these club-mediated interactions, positive network effects operate from the fan market to the sponsor market, while positive or negative network effects operate from the sponsor market to the fan market. Clubs react to these network effects by charging higher (lower) prices to sponsors (fans). The size of these network effects also determines the level of competitive balance within the league. We further show that clubs benefit from stronger combined network effects through higher profits and that network externalities can mitigate the negative effect of revenue sharing on competitive balance. Finally, we derive implications for improving competitive balance by taking advantage of network externalities.

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File URL: http://repec.business.uzh.ch/RePEc/rsd/CRSA_WPS/31_CRSA_full.pdf
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Bibliographic Info

Paper provided by University of Zurich, Center for Research in Sports Administration (CRSA) in its series Working Papers with number 0031.

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Length: 30 pages
Date of creation: Nov 2009
Date of revision: Nov 2010
Handle: RePEc:rsd:wpaper:0031

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Keywords: Competitive balance; contest; multisided market; network externalities; team sports league;

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References

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  2. 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).
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Citations

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Cited by:
  1. 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.
  2. Christoph Breuer & Helmut Dietl & Christian WeingŠrtner & Pamela Wicker, 2011. "The effect of a sports institutionÕs legal structure on sponsorship income: The case of amateur equestrian sports in Germany," Working Papers 0043, University of Zurich, Center for Research in Sports Administration (CRSA).

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