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To the highest bidder: The market for talent in sports leagues

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Abstract

We present a realistic and novel micro-structure for the market for athletes in league sports. In our trading mechanism the clubs bid for individual players, internalizing the effect that a player not hired might play for the competition. For inelastic talent supply, our (wage minimizing) equilibrium supports the Coasian results of Rottenberg (1956) and Fort and Quirk (1995): talent allocation is independent of initial ownership and revenue sharing arrangements. When talent supply is elastic, revenue sharing decreases the aggregate amount of talent hired. This negative effect on the talent level may be efficiency enhancing when the competition for talent results in excess talent being hired. For the first time in the literature, we carry out our entire analysis using a newly formulated, unspecified club objective, incorporating both pecuniary and non-pecuniary benefits.

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  • Roberto Burguet & Jozsef Sakovics, 2016. "To the highest bidder: The market for talent in sports leagues," Edinburgh School of Economics Discussion Paper Series 275, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:275
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