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Free Ride, Take it Easy: An Empirical Analysis of Adverse Incentives Caused by Revenue Sharing

  • Daniel, Rascher
  • Matt, Brown
  • Mark, Nagel
  • Chad, McEvoy

A fundamental belief in professional sport leagues is that competitive balance is needed to maximize demand and revenues; therefore, leagues have created policies attempting to attain proper competitive balance. Further, research posits that objectives of professional sport teams’ owners include some combination of winning and profit maximization. Although the pursuit of wins is a zero sum game, revenue generation and potential profit making is not. This article focuses upon the National Football League’s potential unintended consequences of creating the incentive for some teams to free ride on the rest of the league’s talent and brand. It examines whether an owner’s objectives to generate increased revenues and profits are potentially enhanced by operating as a continual low-cost provider while making money from the shared revenues and brand value of the league. The present evidence indicates that, overall, being a low-cost provider is more profitable than increasing player salaries in an attempt to win additional games.

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File URL: http://mpra.ub.uni-muenchen.de/25806/1/MPRA_paper_25806.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25806.

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Date of creation: 2009
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Handle: RePEc:pra:mprapa:25806
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  1. Scully, Gerald W., 1995. "The Market Structure of Sports," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226743950.
  2. Phillip A. Miller, 2009. "Facility Age and Ownership in Major American Team Sports Leagues: The Effect on Team Franchise Values," International Journal of Sport Finance, Fitness Information Technology, vol. 4(3), pages 176-191, August.
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