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Competition Between Sports Leagues: Theory and Evidence on Rival League Formation in North America

Author

Listed:
  • Che, XiaoGang

    () (University of Alberta, Department of Economics)

  • Humphreys, Brad

    () (University of Alberta, Department of Economics)

Abstract

We analyze the formation of rival leagues in professional team sports, one of the least studied forms of competition in sport. We survey the economic history of professional sports leagues in North America and develop stylized facts about rival league formation and develop a game-theoretic model of entry of a rival league to an existing market to explain these stylized facts. This model accounts for the strategic interaction between the incumbent and rival league and costs associated with acquiring new players from the incumbent league. The model predicts that either expanding to deter rival league formation, or allowing a rival league to form and then merging with that league is a subgame perfect equilibrium, and that incumbent leagues will pay players relatively high salaries to deter entry by a rival league.

Suggested Citation

  • Che, XiaoGang & Humphreys, Brad, 2012. "Competition Between Sports Leagues: Theory and Evidence on Rival League Formation in North America," Working Papers 2012-23, University of Alberta, Department of Economics.
  • Handle: RePEc:ris:albaec:2012_023
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    File URL: https://sites.ualberta.ca/~econwps/2012/wp2012-23.pdf
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    References listed on IDEAS

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    Cited by:

    1. Humphreys, Brad & Zhou, Li, 2014. "Loss Aversion, Team Relocations, and Major League Expansion," Working Papers 2014-3, University of Alberta, Department of Economics.
    2. repec:eee:exehis:v:65:y:2017:i:c:p:55-67 is not listed on IDEAS

    More about this item

    Keywords

    professional team sports; rival league; monopsony;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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