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Franchise Relocations, Expansions, and Mergers in Professional Sports Leagues

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  • Daniel, Rascher

Abstract

All three sections in this chapter are interrelated. Expansions and relocations, especially in the early years of a league, are often the response to upstart rival leagues. More recently, relocations have occurred because another city offers a better facility lease regardless of whether the league as a whole is better off or not. Relocations, more so than expansions, often end up in court whether as an antitrust case accusing the league of monopolistically restricting business or as an eminent domain suit attempting to prevent a team from relocating. Recent rulings have allowed a league to enforce a relocation fee that is commensurate with the harm caused to the rest of the league because of the move. Rivalries often begin with a few teams in major cities competing head-to-head with the existing dominant league. Inevitably, the sport ends up with one major league providing top level play, begging the question of whether sports leagues are natural monopolies. This occurs either with a merger, a partial merger, an acquisition or, most commonly, a failed rival league. Often the incumbent league emerges from the rivalry a stronger, more stable business, having been forced to address a weakness exploited by the rival (e.g., MLB failing to recognize the western markets). Additionally, the new locations of franchises have often been vetted by the upstart rival to determine which few are most profitable and sustainable.

Suggested Citation

  • Daniel, Rascher, 2008. "Franchise Relocations, Expansions, and Mergers in Professional Sports Leagues," MPRA Paper 25809, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:25809
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    File URL: https://mpra.ub.uni-muenchen.de/25809/1/MPRA_paper_25809.pdf
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    References listed on IDEAS

    as
    1. Lawrence Kahn, 2003. "Sports League Expansion and Economic Efficiency: Monopoly Can Enhance Consumer Welfare," CESifo Working Paper Series 1101, CESifo Group Munich.
    2. Dennis Coates & Brad R. Humphreys, 2005. "Novelty Effects Of New Facilities On Attendance At Professional Sporting Events," Contemporary Economic Policy, Western Economic Association International, vol. 23(3), pages 436-455, July.
    3. Young Hoon Lee & Rodney Fort, 2005. "Structural Change in MLB Competitive Balance: The Depression, Team Location, and Integration," Economic Inquiry, Western Economic Association International, vol. 43(1), pages 158-169, January.
    4. Rascher, Daniel & Rascher, Heather, 2004. "NBA Expansion and Relocation: A Viability Study of Various Cities," MPRA Paper 25740, University Library of Munich, Germany.
    5. Angelo Cocco & J. C. H. Jones, 1997. "On going south: the economics of survival and relocation of small market NHL franchises in Canada," Applied Economics, Taylor & Francis Journals, vol. 29(11), pages 1537-1552.
    6. Dennis W. Carlton & Alan S. Frankel & Elisabeth M. Landes, 2004. "The Control of Externalities in Sports Leagues: An Analysis of Restrictions in the National Hockey League," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 268-288, February.
    7. Rodney Fort, 2006. "Value of Major League Baseball Ownership," International Journal of Sport Finance, Fitness Information Technology, vol. 1(1), pages 9-20, February.
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    Cited by:

    1. Oliver Budzinski, 2011. "The Institutional Framework for Doing Sports Business: Principles of EU Competition Policy in Sports Markets," Working Papers 108/11, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    2. Daniel H. Weinberg, 2013. "Talent Recruitment and Firm Performance: The Business of Major League Sports," Working Papers 13-54r, Center for Economic Studies, U.S. Census Bureau, revised Feb 2014.

    More about this item

    Keywords

    competition; expansion; relocation; merger; football; baseball; basketball; hockey; sports;

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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