Are Voluntary Salary Cap Agreements Self-Enforcing?
In 2002 the leading European football clubs reacted to the increasing player salaries by signing a voluntary agreement to limit player salaries to 70% of revenues. We analyze under which conditions a voluntary salary cap agreement is self-enforcing. Based on a simple model of a league with two profit-maximizing clubs, we show that the self-enforcing character of salary caps increases with the clubs’ valuation of future profits and the importance of competitive balance. In European football leagues salary cap agreements are not likely to be self-enforcing because (1) promotion and relegation as well as limited transfer windows reduce the clubs’ discount factor and (2) competitive balance is less important in order to activate fan interest than in US Major Leagues.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: ++41 1 634 29 27
Fax: ++41 1 634 43 48
Web page: http://www.crsa.uzh.ch
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:rsd:wpaper:0003. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (IBW IT Support)
If references are entirely missing, you can add them using this form.