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Inter-league competition for talent vs. competitive balance

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  • Palomino, Frederic
  • Sakovics, Jozsef

Abstract

We analyze the distribution of broadcasting revenues by sports leagues. We show that when the teams engage in competitive bidding to attract talent in an isolated league, the league's optimal choice is full revenue sharing (resulting in full competitive balance). In contrast, when the teams of several leagues bid for talent, in equilibrium the leagues choose a performance-based reward scheme. We thus provide an explanation for the differences in revenue sharing rules for national TV rights used by the U.S. sports leagues (full revenue sharing) and European football leagues (performance-based reward).
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Suggested Citation

  • Palomino, Frederic & Sakovics, Jozsef, 2004. "Inter-league competition for talent vs. competitive balance," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 783-797, June.
  • Handle: RePEc:eee:indorg:v:22:y:2004:i:6:p:783-797
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    Cited by:

    1. Paul Madden & Mario Pezzino, 2013. "Sports League Quality, Broadcaster TV Rights Bids and Wholesale Regulation of Sports Channels," The School of Economics Discussion Paper Series 1304, Economics, The University of Manchester.
    2. Paul Madden, 2010. "Gametheoretic analysis of basic team sports leagues," The School of Economics Discussion Paper Series 1006, Economics, The University of Manchester.
    3. Vincent Hogan & Patrick Massey & Shane Massey, 2013. "Competitive Balance and Match Attendance in European Rugby Union Leagues," The Economic and Social Review, Economic and Social Studies, vol. 44(4), pages 425-446.
    4. Zhang, C., 2006. "Ethics, investments and investor behavior," Other publications TiSEM 97c94039-7311-4f85-8047-2, Tilburg University, School of Economics and Management.
    5. Sami Dakhlia & Paul Pecorino, 2006. "Rent-seeking with scarce talent: A model of preemptive hiring," Public Choice, Springer, vol. 129(3), pages 475-486, December.
    6. Paul Madden, 2008. "Price, quality and welfare consequences of alternative club objectives in a professional sport league," The School of Economics Discussion Paper Series 0802, Economics, The University of Manchester.
    7. Palomino, F.A. & Renneboog, L.D.R. & Zhang, C., 2005. "Stock Price Reactions to Short-Lived Public Information : The Case of Betting Odds," Discussion Paper 2005-016, Tilburg University, Tilburg Law and Economic Center.
    8. Falconieri, S. & Palomino, F.A. & Sakovics, J., 2002. "Collective vs Individual Sale of TV Rights in League Sports," Discussion Paper 2002-106, Tilburg University, Center for Economic Research.
    9. Palomino, Frederic & Renneboog, Luc & Zhang, Chendi, 2009. "Information salience, investor sentiment, and stock returns: The case of British soccer betting," Journal of Corporate Finance, Elsevier, vol. 15(3), pages 368-387, June.
    10. repec:bla:randje:v:48:y:2017:i:4:p:906-926 is not listed on IDEAS
    11. Steven Salaga & Alan Ostfield & Jason Winfree, 2014. "Revenue Sharing with Heterogeneous Investments in Sports Leagues: Share Media, Not Stadiums," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 45(1), pages 1-19, August.
    12. Pelnar, Gregory, 2007. "Antitrust Analysis of Sports Leagues," MPRA Paper 5382, University Library of Munich, Germany.
    13. Roberto Burguet & József Sákovics, 2016. "To the Highest Bidder: The Market for Talent in Sports Leagues," Working Papers 902, Barcelona Graduate School of Economics.
    14. Thomas Peeters, 2011. "Optimal gate revenue sharing in sports leagues," Working Papers 1122, International Association of Sports Economists;North American Association of Sports Economists.
    15. Harrie A. A Verbon, 2007. "Migrating Football Players, Transfer Fees and Migration Controls," CESifo Working Paper Series 2004, CESifo Group Munich.
    16. Yvon Rocaboy, 2017. "Competition Among National Football Leagues. Does It Exist? Should We Regulate?," Scottish Journal of Political Economy, Scottish Economic Society, pages 88-114.
    17. Peeters, Thomas, 2012. "Media revenue sharing as a coordination device in sports leagues," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 153-163.
    18. Jan Šíma & Jan Procházka, 2011. "Compared Competitive Balance Evolution in the Dutch and the Czech Football Leagues between 1970 and 2010," Ekonomika a Management, University of Economics, Prague, vol. 2011(2).
    19. Patrick Massey & Shane Massey & Vincent (Vincent Peter) Hogan, 2012. "Analysing Determinants of Match Attendance in the European Rugby Cup," Working Papers 201228, School of Economics, University College Dublin.
    20. Gianni De Fraja, 2011. "A Theoretical Analysis of Public Funding for Research," CEIS Research Paper 199, Tor Vergata University, CEIS, revised 30 Jun 2011.
    21. Roberto Burguet & József Sákovics, 2017. "Competitive foreclosure," RAND Journal of Economics, RAND Corporation, pages 906-926.

    More about this item

    JEL classification:

    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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