Franchise Relocations, Expansions, and Mergers in Professional Sports Leagues
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.
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- Dennis Coates & Brad R. Humphreys, 2003.
"Novelty Effects of New Facilities on Attendance at Professional Sporting Events,"
UMBC Economics Department Working Papers
03-101, UMBC Department of Economics.
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