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TV Revenue Sharing as a Coordination Device in Sports Leagues

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  • Thomas Peeters

    ()
    (University of Antwerp)

Abstract

As sports clubs jointly produce contests, they cannot determine contest quality through their private talent investments. Sports leagues therefore try to coordinate talent investments towards the profit-maximizing contest quality. In this paper I analyze how revenue sharing mechanisms may serve this goal when demand comes from hard-core club and neutral sports fans. Performance-based sharing turns out to be an inefficient sharing rule for the cartel, although it is not harmful for social welfare. This inefficient cartel behavior can be rationalized as the result of bargaining with asymmetric outside options. Data from US and European sports leagues illustrate the theoretical findings.

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File URL: http://college.holycross.edu/RePEc/spe/Peeters_TVRevenueSharing.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 1109.

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Length: 29 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:spe:wpaper:1109

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Web page: http://www.kennesaw.edu/naase
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Keywords: cartel behavior; revenue sharing; sports leagues; TV rights;

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  1. Donald G. Ferguson & J. C. H. Jones & Kenneth G. Stewart, 2000. "Competition Within A Cartel: League Conduct And Team Conduct In The Market For Baseball Player Services," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 422-430, August.
  2. Stefan Kesenne, 2000. "Revenue Sharing and Competitive Balance in Professional Team Sports," Journal of Sports Economics, , vol. 1(1), pages 56-65, February.
  3. SZYMANSKI, Stefan & KÉSENNE, Stefan, 2003. "Competitive balance and gate revenue sharing in team sports," Working Papers 2003003, University of Antwerp, Faculty of Applied Economics.
  4. Lawrence M. Kahn, 2007. "Markets: Cartel Behavior and Amateurism in College Sports," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 209-226, Winter.
  5. Sonia Falconieri & Frédéric Palomino & József Sákovics, 2004. "Collective Versus Individual Sale of Television Rights in League Sports," Journal of the European Economic Association, MIT Press, vol. 2(5), pages 833-862, 09.
  6. 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..
  7. Frederic Palomino & Jozsef Sakovics, 2004. "Inter-league competition for talent vs. competitive balance," ESE Discussion Papers 96, Edinburgh School of Economics, University of Edinburgh.
  8. Szymanski, Stefan, 2001. "Income Inequality, Competitive Balance and the Attractiveness of Team Sports: Some Evidence and a Natural Experiment from English Soccer," Economic Journal, Royal Economic Society, vol. 111(469), pages F69-84, February.
  9. David Forrest & Rob Simmons & Stefan Szymanski, 2004. "Broadcasting, Attendance and the Inefficiency of Cartels," Review of Industrial Organization, Springer, vol. 24(3), pages 243-265, 05.
  10. David Forrest & Robert Simmons & Babatunde Buraimo, 2005. "Outcome Uncertainty And The Couch Potato Audience," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(4), pages 641-661, 09.
  11. Thomas Peeters, 2011. "Broadcast Rights and Competitive Balance in European Soccer," International Journal of Sport Finance, Fitness Information Technology, vol. 6(1), pages 23-39, February.
  12. Lars-Hendrik R�ller & Frode Steen, 2006. "On the Workings of a Cartel: Evidence from the Norwegian Cement Industry," American Economic Review, American Economic Association, vol. 96(1), pages 321-338, March.
  13. Simon Rottenberg, 1956. "The Baseball Players' Labor Market," Journal of Political Economy, University of Chicago Press, vol. 64, pages 242.
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Cited by:
  1. Oliver Guertler & Markus Lang & Tim Pawlowski, 2011. "On the Release of Players to National Teams," Working Papers 0046, University of Zurich, Center for Research in Sports Administration (CRSA).
  2. Egon Franck & Markus Lang, 2013. "A Theoretical Analysis of the Influence of Money Injections on Risk Taking in Football Clubs," Working Papers 0160, University of Zurich, Institute for Strategy and Business Economics (ISU).
  3. PEETERS, Thomas, 2011. "Optimal gate revenue sharing in sports leagues," Working Papers 2011015, University of Antwerp, Faculty of Applied Economics.

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