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The Effect of Marginal Cost Elasticity on Competitive Balance

Author

Listed:
  • Martin Grossmann

    (University of Zurich)

  • Helmut M. Dietl

    (University of Zurich)

  • Urs Trinkner

    (University of Zurich)

Abstract

This article presents a model of talent investments where two clubs compete for prizes. Our model is based on a general class of cost functions with a constant elasticity of marginal costs with respect to investments. The analysis finds that reduced revenue sharing improves competitive balance. Furthermore, we show that a higher elasticity of marginal costs with respect to investments enhances competitive balance and simultaneously reduces the negative effect of revenue sharing on competitive balance.

Suggested Citation

  • Martin Grossmann & Helmut M. Dietl & Urs Trinkner, 2008. "The Effect of Marginal Cost Elasticity on Competitive Balance," Journal of Sports Economics, , vol. 9(4), pages 339-350, August.
    • Handle: RePEc:sae:jospec:v:9:y:2008:i:4:p:339-350
    DOI: 10.1177/1527002507310959
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    References listed on IDEAS

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    Cited by:

    1. A. Aiche & E. Einy & O. Haimanko & D. Moreno & A. Sela & B. Shitovitz, 2019. "Information in Tullock contests," Theory and Decision, Springer, vol. 86(3), pages 303-323, May.
    2. Martin Grossmann, 2015. "Evolutionarily Stable Strategies in Sports Contests," Journal of Sports Economics, , vol. 16(1), pages 108-121, January.
    3. Martin Grossmann & Helmut M. Dietl, 2009. "Investment Behaviour in a Two-Period Contest Model," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(3), pages 401-417, September.
    4. Rockerbie, Duane W, 2012. "Exploring inter-league parity in North America: the NBA anomaly," MPRA Paper 43088, University Library of Munich, Germany.
    5. Helmut Dietl & Martin Grossmann & Andreas Hefti & Markus Lang, 2015. "Spillovers in Sports Leagues with Promotion and Relegation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(1), pages 59-74, February.

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