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Competitive Balance and Revenue Sharing in Sports Leagues With Utility-Maximizing Teams

Author

Listed:
  • Helmut M. Dietl

    (Department of Business Administration, University of Zurich, Zurich, Switzerland)

  • Martin Grossmann

    (Department of Business Administration, University of Zurich, Zurich, Switzerland)

  • Markus Lang

    (Department of Business Administration, University of Zurich, Zurich, Switzerland, markus.lang@business.uzh.ch)

Abstract

This paper develops a contest model of a professional sports league in which clubs maximize a weighted sum of profits and wins (utility maximization). The model analyzes how more win-oriented behavior of certain clubs affects talent investments, competitive balance, and club profits. Moreover, in contrast to traditional models, the authors show that revenue sharing does not always reduce investment incentives due to the dulling effect. The authors identify a new effect of revenue sharing called the ‘‘sharpening effect.’’ In the presence of the sharpening effect (dulling effect), revenue sharing enhances (reduces) investment incentives and improves (deteriorates) competitive balance in the league.

Suggested Citation

  • Helmut M. Dietl & Martin Grossmann & Markus Lang, 2011. "Competitive Balance and Revenue Sharing in Sports Leagues With Utility-Maximizing Teams," Journal of Sports Economics, , vol. 12(3), pages 284-308, June.
  • Handle: RePEc:sae:jospec:v:12:y:2011:i:3:p:284-308
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    Citations

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    Cited by:

    1. Pamela Wicker & Christian Weingärtner & Christoph Breuer & Helmut Dietl, 2012. "The Effect of a Sports Institution’s Legal Structure on Sponsorship Income: The Case of Amateur Equestrian Sports in Germany," International Journal of Sport Finance, Fitness Information Technology, vol. 7(4), pages 340-357, November.
    2. Martin Grossmann, 2015. "Evolutionarily Stable Strategies in Sports Contests," Journal of Sports Economics, , vol. 16(1), pages 108-121, January.
    3. Yvon Rocaboy, 2017. "Competition Among National Football Leagues. Does It Exist? Should We Regulate?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(1), pages 88-114, February.
    4. Hayley Jang & Young Hoon Lee, 2016. "A Business Analysis of Asian Baseball Leagues," Asian Economic Policy Review, Japan Center for Economic Research, vol. 11(1), pages 95-112, January.
    5. Martina Gianecchini & Alberto Alvisi, 2015. "Late career of superstar soccer players: win, play, or gain?," "Marco Fanno" Working Papers 0192, Dipartimento di Scienze Economiche "Marco Fanno".
    6. Halicioglu, Ferda, 2012. "An empirical study of relationship between FIFA world ranking and domestic football competition level: the case of Turkey," MPRA Paper 35662, University Library of Munich, Germany.
    7. Eddy, Terry, 2014. "Measuring effects of naming-rights sponsorships on college football fans’ purchasing intentions," Sport Management Review, Elsevier, vol. 17(3), pages 362-375.
    8. Caruso, Raul & Addesa, Francesco & Di Domizio, Marco, 2016. "The Determinants Of The TV Demand Of Soccer: Empirical Evidence On Italian Serie A For The Period 2008-2015," MPRA Paper 70189, University Library of Munich, Germany.
    9. Helmut Dietl & Rodney Fort & Markus Lang, 2011. "International Sports League Comparisons," Working Papers 0042, University of Zurich, Center for Research in Sports Administration (CRSA).
    10. Peter Sloane, 2014. "Club objectives," Chapters,in: Handbook on the Economics of Professional Football, chapter 1, pages 13-22 Edward Elgar Publishing.

    More about this item

    Keywords

    competitive balance; contest; invariance proposition; revenue sharing; team sports league; utility maximization;

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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