IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/77428.html
   My bibliography  Save this paper

Revenue Sharing in Professional Sports Leagues as a Hedge for Exchange Rate Risk

Author

Listed:
  • Rockerbie, Duane
  • Easton, Stephen

Abstract

Professional sports leagues that feature teams in different countries with different currencies are exposed to exchange rate uncertainty and risk. This is particularly evident for three professional sports leagues that feature teams in the United States and Canada. We construct a simple model of a profit-maximizing team that earns its revenue in one currency and meets its payroll obligations in a second currency and participates in a league-imposed revenue sharing plan. Team profit can increase or decrease due to movements in the exchange rate based on a simple condition. Revenue sharing reduces the exposure to exchange rate uncertainty and risk. Hedging is possible for a single team by adjusting its payroll, but not likely. Some elementary calculations suggest this previously unrecognized benefit of revenue sharing is substantial for baseball’s Toronto Blue Jays.

Suggested Citation

  • Rockerbie, Duane & Easton, Stephen, 2017. "Revenue Sharing in Professional Sports Leagues as a Hedge for Exchange Rate Risk," MPRA Paper 77428, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:77428
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/77428/1/MPRA_paper_77428.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Stefan Kesenne, 2015. "Revenue Sharing and Absolute League Quality; Talent Investment and Talent Allocation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(1), pages 51-58, February.
    2. Rodney Fort, 2010. "Observation, Replication, and Measurement in Sports Economics," Journal of Sports Economics, , vol. 11(1), pages 3-16, February.
    3. Stefan Kesenne, 2007. "Revenue Sharing and Owner Profits in Professional Team Sports," Journal of Sports Economics, , vol. 8(5), pages 519-529, October.
    4. Stefan Szymanski & Stefan Késenne, 2010. "Competitive Balance and Gate Revenue Sharing in Team Sports," Palgrave Macmillan Books, in: The Comparative Economics of Sport, chapter 7, pages 229-243, Palgrave Macmillan.
    5. Rodney Fort & James Quirk, 1995. "Cross-subsidization, Incentives, and Outcomes in Professional Team Sports Leagues," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1265-1299, September.
    6. Stephen T. Easton & Duane W. Rockerbie, 2005. "Revenue Sharing, Conjectures, and Scarce Talent in a Sports League Model," Journal of Sports Economics, , vol. 6(4), pages 359-378, November.
    7. Rockerbie, Duane, 2007. "Free Agent Auctions and Revenue Sharing: A Simple Approach," MPRA Paper 2218, University Library of Munich, Germany.
    8. John Vrooman, 2009. "Theory of the Perfect Game: Competitive Balance in Monopoly Sports Leagues," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(1), pages 5-44, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Duane Rockerbie & Stephen Easton, 2018. "Revenue Sharing in Major League Baseball: The Moments That Meant so Much," IJFS, MDPI, vol. 6(3), pages 1-16, August.
    2. Rockerbie, Duane, 2011. "The Invariance Proposition in Baseball: New Evidence," MPRA Paper 55020, University Library of Munich, Germany.
    3. Rockerbie, Duane & Easton, Stephen, 2017. "Risk Diversification from Revenue Sharing in a Professional Sports League: Measuring Welfare Gains," MPRA Paper 77431, University Library of Munich, Germany.
    4. Thomas Peeters, 2015. "Profit-Maximizing Gate Revenue Sharing In Sports Leagues," Economic Inquiry, Western Economic Association International, vol. 53(2), pages 1275-1291, April.
    5. Jason Winfree & Rodney Fort, 2012. "Nash Conjectures and Talent Supply in Sports League Modeling," Journal of Sports Economics, , vol. 13(3), pages 306-313, June.
    6. Fort, Rodney & Maxcy, Joel & Diehl, Mark, 2016. "Uncertainty by regulation: Rottenberg׳s invariance principle," Research in Economics, Elsevier, vol. 70(3), pages 454-467.
    7. Martin Grossmann & Helmut Dietl & Markus Lang, 2010. "Revenue Sharing and Competitive Balance in a Dynamic Contest Model," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(1), pages 17-36, February.
    8. Helmut M. Dietl & Martin Grossmann & Markus Lang, 2011. "Competitive Balance and Revenue Sharing in Sports Leagues With Utility-Maximizing Teams," Journal of Sports Economics, , vol. 12(3), pages 284-308, June.
    9. Paul Madden, 2018. "Collective Bargaining in a Basic North American Sports League Model," Economics Discussion Paper Series 1812, Economics, The University of Manchester.
    10. Liam J. A. Lenten, 2015. "Measurement of Competitive Balance in Conference and Divisional Tournament Design," Journal of Sports Economics, , vol. 16(1), pages 3-25, January.
    11. Helmut Dietl & Rodney Fort & Markus Lang, 2011. "International Sports League Comparisons," Working Papers 0144, University of Zurich, Institute for Strategy and Business Economics (ISU).
    12. Thomas Peeters, 2011. "Optimal gate revenue sharing in sports leagues," Working Papers 1122, International Association of Sports Economists;North American Association of Sports Economists.
    13. Peter J. Sloane, 2015. "The Economics of Professional Football Revisited," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(1), pages 1-7, February.
    14. Duane W. Rockerbie & Stephen T. Easton, 2019. "Of Bricks and Bats: New Stadiums, Talent Supply, and Team Performance in Major League Baseball," Journal of Sports Economics, , vol. 20(1), pages 3-24, January.
    15. Rodney Fort & Jason Winfree, 2009. "Sports Really are Different: The Contest Success Function and the Supply of Talent," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(1), pages 69-80, February.
    16. Michel Cavagnac, 2009. "Revenue Sharing and Competitive Balance When Teams are not Wage Takers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(3), pages 299-313, November.
    17. Rockerbie, Duane W, 2012. "Exploring inter-league parity in North America: the NBA anomaly," MPRA Paper 43088, University Library of Munich, Germany.
    18. Masaki Fujimoto, 2023. "A Dynamic Analysis of Equal Revenue Sharing and Endogenous Salary Caps in the N-Team Leagues," Journal of Sports Economics, , vol. 24(5), pages 624-638, June.
    19. John Vrooman, 2015. "Sportsman Leagues," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(1), pages 90-115, February.
    20. Philippe Cyrenne, 2009. "Modelling Professional Sports Leagues: An Industrial Organization Approach," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(3), pages 193-215, May.

    More about this item

    Keywords

    Revenue sharing; exchange rate; baseball; risk;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:77428. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.