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Aggregative Contests and Ex-post Heterogeneity: the Case of the UEFA Champions League

Author

Listed:
  • Martin Grossmann

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

  • Andreas Hefti

    () (Department of Economics, University of Zurich)

  • Markus Lang

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

Abstract

The UEFA Champions League is an annual Pan-European football competition that takes place parallel to the domestic league competitions. The participation in the Champions League secures the teams large payments, which have steadily increased over the last decade. This paper develops a general contest model of a professional team sports league in which the winner of the domestic league competition participates in the Champions League and has the possibility to win an additional prize. Our model considers two leagues where each league is composed out of several profit-maximizing clubs. We analyze the impact of the Champions League on investment incentives, competitive balance and club profits. Our model shows that the Champions League prize and domestic league prize have differential effects on competitive balance: an increase in the Champions League prize decreases competitive balance, while an increase in the domestic league prize increases competitive balance.

Suggested Citation

  • Martin Grossmann & Andreas Hefti & Markus Lang, 2012. "Aggregative Contests and Ex-post Heterogeneity: the Case of the UEFA Champions League," Working Papers 0161, University of Zurich, Institute for Strategy and Business Economics (ISU).
  • Handle: RePEc:iso:wpaper:0161
    as

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    File URL: http://repec.business.uzh.ch/RePEc/iso/ISU_WPS/161_ISU_full.pdf
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    References listed on IDEAS

    as
    1. Markus Lang & Martin Grossmann & Philipp Theiler, 2011. "The Sugar Daddy Game: How Wealthy Investors Change Competition in Professional Team Sports," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(4), pages 557-577, December.
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    5. Helmut M. Dietl & Markus Lang, 2008. "The Effect Of Gate Revenue Sharing On Social Welfare," Contemporary Economic Policy, Western Economic Association International, vol. 26(3), pages 448-459, July.
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    13. Helmut M. Dietl & Egon Franck & Markus Lang & Alexander Rathke, 2012. "Salary Cap Regulation In Professional Team Sports," Contemporary Economic Policy, Western Economic Association International, vol. 30(3), pages 307-319, July.
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    Cited by:

    1. Grossmann, Martin & Dietl, Helmut, 2015. "Heterogeneous outside options in contests," European Journal of Political Economy, Elsevier, vol. 37(C), pages 280-287.

    More about this item

    Keywords

    Aggregative game; contest; heterogeneity; team sports league;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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