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Revenue Sharing and Competitive Balance in a Dynamic Contest Model

  • Martin Grossmann


  • Helmut Dietl


  • Markus Lang


This paper presents a dynamic model of talent investments in a team sports league with an infinite time horizon. We show that the clubs' investment decisions and the effects of revenue sharing on competitive balance depend on the following three factors: (i) the cost function of talent investments, (ii) the clubs' market sizes, and (iii) the initial endowments of talent stock. We analyze how these factors interact in the transition to the steady state as well as in the steady state itself.

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Article provided by Springer in its journal Review of Industrial Organization.

Volume (Year): 36 (2010)
Issue (Month): 1 (February)
Pages: 17-36

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Handle: RePEc:kap:revind:v:36:y:2010:i:1:p:17-36
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  7. KÉSENNE, Stefan, . "Revenue sharing and competitive balance in professional team sports," Working Papers 1999019, University of Antwerp, Faculty of Applied Economics.
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  9. Stefan Szymanski, 2003. "The Economic Design of Sporting Contests," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1137-1187, December.
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  18. Helmut Dietl & Markus Lang, 2006. "The Effect of Gate Revenue-Sharing on Social Welfare," Working Papers 0012, University of Zurich, Center for Research in Sports Administration (CRSA), revised 2007.
  19. Rodney Fort & Jason Winfree, 2009. "Sports Really are Different: The Contest Success Function and the Supply of Talent," Review of Industrial Organization, Springer, vol. 34(1), pages 69-80, February.
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