The Sport League's Dilemma: Competitive Balance versus Incentives to Win
AbstractWe analyze a dynamic model of strategic interaction between a professional sport league that organizes a tournament, the teams competing to win it, and the broadcasters paying for the rights to televise it. Teams and broadcasters maximize expected profits, while the league's objective may be either to maximize the demand for the sport or to maximize the teams' joint profits. Demand depends positively on symmetry among teams (competitive balance) and how aggressively teams try to win (incentives to win). Revenue sharing increases competitive balance but decreases incentives to win. Under demand maximization, a performance-based reward scheme (used by European sport leagues) may be optimal. Under joint profit maximization, full revenue sharing (used by many US leagues) is always optimal. These results reflect institutional differences among European and American sports leagues.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series Industrial Organization with number 0012003.
Length: 36 pages
Date of creation: 05 Jan 2001
Date of revision:
Note: 36 pages, Acrobat .pdf
Contact details of provider:
Web page: http://22.214.171.124
Other versions of this item:
- Palomino, F.A. & Rigotti, L., 2000. "The Sport League's Dilemma: Competitive Balance versus Incentives to Win," Discussion Paper 2000-109, Tilburg University, Center for Economic Research.
- Palomino, Frederic & Rigotti, Luca, 2000. "The Sport League's Dilemma: Competitive Balance versus Incentives to Win," Department of Economics, Working Paper Series qt2w3284jj, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Frederic Palomino and Luca Rigotti., 2000. "The Sport League's Dilemma: Competitive Balance versus Incentives to Win," Economics Working Papers E00-292, University of California at Berkeley.
- L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
- L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Frederic Palomino & Jozsef Sakovics, 2004.
"Revenue sharing in professional sports leagues: for the sake of competitive balance or as a result of monopsony power?,"
ESE Discussion Papers
59, Edinburgh School of Economics, University of Edinburgh.
- Palomino, F.A. & Sakovics, J., 2000. "Revenue Sharing in Professional Sports Leagues: For the Sake of Competitive Balance or as a Result of Monopsony Power?," Discussion Paper 2000-110, Tilburg University, Center for Economic Research.
- Scully, Gerald W., 1995. "The Market Structure of Sports," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226743950.
- Stefan Szymanski & Ron Smith, 1997. "The English Football Industry: profit, performance and industrial structure," International Review of Applied Economics, Taylor & Francis Journals, vol. 11(1), pages 135-153.
- Michel Cavagnac, 2009. "Revenue Sharing and Competitive Balance When Teams are not Wage Takers," Review of Industrial Organization, Springer, vol. 35(3), pages 299-313, November.
- Nicola Giocoli, 2007. "Competitive balance in football leagues when teams have different goals," International Review of Economics, Springer, vol. 54(3), pages 345-370, September.
- Stephen Easton & Duane Rockerbie, 2003. "Revenue Sharing, Conjectures, and Scarce Talent in a Model of a Professional Sports League," Industrial Organization 0303010, EconWPA.
- Giorgo Sertsios, 2007. "¿Puede el Diseño de un Torneo Deportivo Afectar su Asistencia?," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 44(129), pages 59-89.
- Pelnar, Gregory, 2007. "Antitrust Analysis of Sports Leagues," MPRA Paper 5382, University Library of Munich, Germany.
- Falconieri, S. & Palomino, F.A. & Sakovics, J., 2002.
"Collective vs Individual Sale of TV Rights in League Sports,"
2002-106, Tilburg University, Center for Economic Research.
- Sonia Falconieri & Frederic Palomino & Jozsef Sakovics, 2004. "Collective vs. Individual Sale of TV Rights in League Sports," ESE Discussion Papers 85, Edinburgh School of Economics, University of Edinburgh.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.