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Revenue Sharing, Conjectures, and Scarce Talent in a Model of a Professional Sports League

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Author Info

  • Stephen Easton

    (Simon Fraser University)

  • Duane Rockerbie

    (University of Lethbridge)

Abstract

We develop a model of a representative professional sports club that has the option of adopting one of two different forms of revenue sharing: traditional revenue sharing and central pool type revenue sharing. To adopt either form of revenue sharing, the league requires that a majority of clubs increase profit with adoption of the plan. We derive necessary conditions for either plan to garner enough support for a majority vote. The likelihood of forming a majority on the conjectures on acquiring talent that clubs possess. Competitive conjectures make revenue sharing more likely, while cartel conjectures make revenue sharing less likely. Empirical results provide evidence in favor of the model for four North American professional sports leagues.

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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0303010.

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Length: 29 pages
Date of creation: 23 Mar 2003
Date of revision:
Handle: RePEc:wpa:wuwpio:0303010

Note: Type of Document - MSWord/pdf; prepared on IBM PC ; to print on HP; pages: 29 ; figures: included
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Web page: http://128.118.178.162

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Keywords: revenue sharing conjectures sports league voting profit;

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  1. 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.
  2. 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.
  3. KÉSENNE, Stefan, . "Revenue sharing and competitive balance in professional team sports," Working Papers 1999019, University of Antwerp, Faculty of Applied Economics.
  4. Peter J. Sloane, 2000. "The Regulation of Professional Team Sports," IASE Conference Papers 0003, International Association of Sports Economists.
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