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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, leagues function as a platform that enables sponsors to interact with fans. In these league-mediated interactions, positive network effects operate from the fan market to the sponsor market, while 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). Our analysis shows that the size of these network effects determines the level of competitive balance within the league. Traditional models, which do not take network externalities into account, under- or overestimate the actual level of competitive balance, which may lead to wrong policy decisions. Moreover, we show that clubs benefit from stronger combined network effects through higher profits. Finally, we derive policy recommendations for improving competitive balance by taking advantage of network externalities.

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File URL: http://college.holycross.edu/RePEc/spe/Dietletal_TwoSidedMarkets.pdf
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Bibliographic Info

Paper provided by International Association of Sports Economists & North American Association of Sports Economists in its series Working Papers with number 0912.

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Length: 29 pages
Date of creation: Nov 2009
Date of revision:
Handle: RePEc:spe:wpaper:0912

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Related research

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

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References

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Citations

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Cited by:
  1. 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).
  2. 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.

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