IDEAS home Printed from https://ideas.repec.org/h/spr/semchp/978-1-4419-6290-4_9.html
   My bibliography  Save this book chapter

Salary Caps in a Model of Talent Allocation

In: The Economics of the National Football League

Author

Listed:
  • Anthony C. Krautmann

    (DePaul University)

  • John L. Solow

    (University of Iowa)

Abstract

One of the central externalities associated with large- vs. small-market teams is the potentially adverse effect of the market allocation of talent on competitive balance. Large-market teams are driven to buy more talent than their small-market counterparts, leading to long-lasting dynasties and perennial losers. Such an adverse effect on game uncertainty is likely to affect fans’ interest in the sport (under the Uncertainty of Outcome Hypothesis), and hence reduce league demand (Rottenberg 1956). To promote competitive balance, intervention by the Commissioner’s office may be warranted to override the free-market allocation. One competitive balance policy widely believed to have the ability to reallocate talent is a limit on team payrolls, known as a salary cap. While an effective salary cap will result in a deadweight welfare loss, this loss may be deemed worthwhile if the benefits associated with improved competitive balance more than offset the costs associated with the welfare loss.

Suggested Citation

  • Anthony C. Krautmann & John L. Solow, 2012. "Salary Caps in a Model of Talent Allocation," Sports Economics, Management, and Policy, in: Kevin G. Quinn (ed.), The Economics of the National Football League, edition 127, chapter 0, pages 159-171, Springer.
    • Handle: RePEc:spr:semchp:978-1-4419-6290-4_9
    DOI: 10.1007/978-1-4419-6290-4_9
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:semchp:978-1-4419-6290-4_9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.