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Cities and Professional Sports Teams: A Dynamic Bargaining Model

Author

Listed:
  • Jeffrey G. Owen

    (Gustavus Adolphus College)

  • William J. Polley

    () (Western Illinois University)

Abstract

We investigate the phenomenon in which professional sports teams receive subsidies from cities to induce them to remain in the city. These subsidies often take the form of public funding for a new stadium. Using a dynamic model of bargaining with asymmetric threat points, we show that teams can extract increasing concessions from the city, culminating with the partial public funding of a new stadium. The model is consistent with many observed city/team bargaining relationships where lease renegotiations often favor the team over the city as teams use the threat of relocation as leverage in negotiations.

Suggested Citation

  • Jeffrey G. Owen & William J. Polley, 2007. "Cities and Professional Sports Teams: A Dynamic Bargaining Model," International Journal of Sport Finance, Fitness Information Technology, vol. 2(2), pages 64-78, May.
  • Handle: RePEc:jsf:intjsf:v:2:y:2007:i:2:p:64-78
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    Cited by:

    1. Humphreys, Brad R. & Zhou, Li, 2015. "Reference-dependent preferences, team relocations, and major league expansion," Journal of Economic Behavior & Organization, Elsevier, vol. 109(C), pages 10-25.
    2. Humphreys, Brad & Zhou, Li, 2014. "Loss Aversion, Team Relocations, and Major League Expansion," Working Papers 2014-3, University of Alberta, Department of Economics.

    More about this item

    Keywords

    stadiums; subsidies; Nash bargaining; dynamic programming;

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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