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Sports League Expansion and Consumer Welfare

Author

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  • Lawrence M. Kahn

    (Cornell University and Princeton University)

Abstract

This article studies sports league expansion and consumer welfare. The author assumes that as a sports league expands, the average quality of playing talent falls, and each fan sees superstars fewer times per season. Expansion thus imposes a negative externality on existing fans. If all revenues come from local sources, such as gate receipts and local media, then the optimal league size (which maximizes total fan utility net of team opportunity costs) is the same as the monopoly league size that maximizes total league profits, but the competitive (free entry) league size is too large. If all revenues are national, split evenly, and where a broadcast network charges a uniform national price to viewers, the optimal league size is between the larger competitive size and the smaller monopoly league size. The more elastic the supply of talent is, the closer the competitive size is to the optimum.

Suggested Citation

  • Lawrence M. Kahn, 2007. "Sports League Expansion and Consumer Welfare," Journal of Sports Economics, , vol. 8(2), pages 115-138, May.
    • Handle: RePEc:sae:jospec:v:8:y:2007:i:2:p:115-138
    DOI: 10.1177/1527002505281227
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    References listed on IDEAS

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    Cited by:

    1. Sofia Izquierdo Sanchez & Caroline Elliott & Robert Simmons, 2016. "Substitution between leisure activities: a quasi-natural experiment using sports viewing and cinema attendance," Applied Economics, Taylor & Francis Journals, vol. 48(40), pages 3848-3860, August.
    2. Stefan Kesenne, 2009. "The Optimal Size of a Sports League," International Journal of Sport Finance, Fitness Information Technology, vol. 4(4), pages 264-270, November.
    3. Larson Jeffrey & Johansson Mikael, 2014. "Constructing schedules for sports leagues with divisional and round-robin tournaments," Journal of Quantitative Analysis in Sports, De Gruyter, vol. 10(2), pages 119-129, June.
    4. Travis Lee, 2010. "Competitive Balance in the National Football League After the 1993 Collective Bargaining Agreement," Journal of Sports Economics, , vol. 11(1), pages 77-88, February.
    5. Lee, Travis, 2020. "Competitive Balance in the National Hockey League after Unrestricted Free Agency and the Salary Cap," MPRA Paper 108400, University Library of Munich, Germany.
    6. Rodney Fort & James Quirk, 2010. "Optimal Competitive Balance in Single-Game Ticket Sports Leagues," Journal of Sports Economics, , vol. 11(6), pages 587-601, December.
    7. XiaoGang Che & Brad Humphreys, 2015. "Competition Between Sports Leagues: Theory and Evidence on Rival League Formation in North America," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(2), pages 127-143, March.
    8. Andy Stevens, 2022. "John Blundell's cricket blueprint revisited," Economic Affairs, Wiley Blackwell, vol. 42(1), pages 144-160, February.
    9. Stefan Kesenne, 2015. "The Single Entity Status of a Sports League," Journal of Sports Economics, , vol. 16(8), pages 811-818, December.

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