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Organizational Differences between U.S. Major Leagues and European Leagues: Implications for Salary Caps

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Author Info

  • Helmut Dietl

    ()
    (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)

  • Alexander Rathke

    ()
    (Institute for Empirical Research in Economics, University of Zurich)

Abstract

This paper outlines and compares the organizational structure of major sports leagues, explores the reasoning behind their formation, and derives implications for salary caps in European football. To understand why sports leagues have developed a specific organizational structure, one must take the economic peculiarities of team sports leagues into consideration. For this purpose, we analyze the production process and illuminate its major peculiarities. For example, we present the difference between economic competition and competition on the pitch and discuss the consequences of this distinction for an attractive final product. Furthermore, we show that a hold-up problem exists between the two stages of the production process and demonstrate how these problems are overcome by the organizational structure chosen by sports leagues. We also outline the differences between the U.S. major leagues and European leagues and document recent developments in that context. Finally, based on this comparative institutional analysis, we derive implications for the introduction of salary caps into European football.

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File URL: http://college.holycross.edu/RePEc/spe/Dietletal_OrganizationalDifferences.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 1105.

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Date of creation: Mar 2011
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Handle: RePEc:spe:wpaper:1105

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Keywords: Sports leagues; organization; salary cap; hold-up problem;

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  1. Martin Grossmann & Helmut Dietl & Markus Lang, 2007. "Revenue Sharing and Competitive Balance in a Dynamic Contest Model," Working Papers 0015, University of Zurich, Center for Research in Sports Administration (CRSA), revised May 2009.
  2. Dietl, Helmut M. & Franck, Egon & Hasan, Tariq & Lang, Markus, 2009. "Governance of professional sports leagues--Cooperatives versus contracts," International Review of Law and Economics, Elsevier, vol. 29(2), pages 127-137, June.
  3. Feess, Eberhard & Muehlheusser, Gerd, 2003. "Transfer fee regulations in European football," European Economic Review, Elsevier, vol. 47(4), pages 645-668, August.
  4. Pedro Garcia-del-Barrio & Stefan Szymanski, 2006. "Goal! Profit maximization and win maximization in football leagues," Working Papers 0621, International Association of Sports Economists & North American Association of Sports Economists.
  5. Késenne Stefan & Szymanski S., 2003. "Competitive balance and gate revenue sharing in team sports," Working Papers 2003003, University of Antwerp, Faculty of Applied Economics.
  6. Helmut Dietl & Markus Lang & Alexander Rathke, 2009. "The Combined Effect of Salary Restrictions and Revenue Sharing in Sports Leagues," Working Papers 0027, University of Zurich, Center for Research in Sports Administration (CRSA), revised Jan 2010.
  7. Helmut M. Dietl & Markus Lang & Stephan Werner, 2009. "Social Welfare in Sports Leagues with Profit-Maximizing and/or Win-Maximizing Clubs," Southern Economic Journal, Southern Economic Association, vol. 76(2), pages 375-396, October.
  8. Helmut Dietl & Egon FrancK & Markus Lang & Alexander Rathke, 2008. "Welfare Effects of Salary Caps in Sports Leagues with Win-Maximizing Clubs," Working Papers 0825, International Association of Sports Economists & North American Association of Sports Economists.
  9. Helmut M. Dietl & Egon Franck & Markus Lang & Alexander Rathke, 2012. "Salary Cap Regulation In Professional Team Sports," Contemporary Economic Policy, Western Economic Association International, vol. 30(3), pages 307-319, 07.
  10. Késenne S., 1999. "Revenue sharing and competitive balance in professional team sports," Working Papers 1999019, University of Antwerp, Faculty of Applied Economics.
  11. John Vrooman, 2007. "Theory Of The Beautiful Game: The Unification Of European Football," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(3), pages 314-354, 07.
  12. 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).
  13. Stefan Szymanski, 2003. "The Economic Design of Sporting Contests," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1137-1187, December.
  14. Sloane, Peter J, 1971. "The Economics of Professional Football: The Football Club as a Utility Maximiser," Scottish Journal of Political Economy, Scottish Economic Society, vol. 18(2), pages 121-46, June.
  15. Peter J. Sloane, 2000. "The Regulation of Professional Team Sports," IASE Conference Papers 0003, International Association of Sports Economists.
  16. Helmut Dietl & Egon Franck & Markus Lang, 2006. "Why football players may benefit from the "shadow of the transfer system"," Working Papers 0062, University of Zurich, Institute for Strategy and Business Economics (ISU), revised 2007.
  17. Kesenne, Stefan, 2000. "The Impact of Salary Caps in Professional Team Sports," Scottish Journal of Political Economy, Scottish Economic Society, vol. 47(4), pages 422-30, September.
  18. Liam J. A. Lenten, 2009. "Unobserved Components in Competitive Balance and Match Attendances in the Australian Football League, 1945-2005: Where is all the Action Happening?," The Economic Record, The Economic Society of Australia, vol. 85(269), pages 181-196, 06.
  19. Simon Rottenberg, 1956. "The Baseball Players' Labor Market," Journal of Political Economy, University of Chicago Press, vol. 64, pages 242.
  20. Jeffery Borland, 2003. "Demand for Sport," Oxford Review of Economic Policy, Oxford University Press, vol. 19(4), pages 478-502, Winter.
  21. Késenne Stefan, 2003. "The salary cap proposal of the G-14 in European football," Working Papers 2003018, University of Antwerp, Faculty of Applied Economics.
  22. Markus Lang & Alexander Rathke & Marco Runkel, 2009. "The Economic Consequences of Foreigner Rules in National Sports Leagues," Working Papers 0908, International Association of Sports Economists & North American Association of Sports Economists.
  23. Allen R. Sanderson & John J. Siegfried, 2003. "Thinking About Competitive Balance," Vanderbilt University Department of Economics Working Papers 0318, Vanderbilt University Department of Economics.
  24. Helmut M. Dietl & Markus Lang, 2008. "The Effect Of Gate Revenue Sharing On Social Welfare," Contemporary Economic Policy, Western Economic Association International, vol. 26(3), pages 448-459, 07.
  25. Rodney Fort & James Quirk, 2010. "Optimal Competitive Balance in Single-Game Ticket Sports Leagues," Journal of Sports Economics, , vol. 11(6), pages 589-601, December.
  26. Helmut Dietl & Egon Franck & Markus Lang, 2005. "Overinvestment in Team Sports Leagues: A Contest Theory Model," Working Papers 0038, University of Zurich, Institute for Strategy and Business Economics (ISU), revised 2007.
  27. Liam J. A. Lenten, 2008. "Unbalanced Schedules And The Estimation Of Competitive Balance In The Scottish Premier League," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(4), pages 488-508, 09.
  28. Stefan Szymanski & Stephen F. Ross, 2007. "Governance And Vertical Integration In Team Sports," Contemporary Economic Policy, Western Economic Association International, vol. 25(4), pages 616-626, October.
  29. 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.
  30. Bernd Frick, 2007. "The Football Players' Labor Market: Empirical Evidence From The Major European Leagues," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(3), pages 422-446, 07.
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