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Competitive Balance and Revenue Sharing in Sports Leagues with Utility-Maximizing Teams


  • Helmut Dietl

    () (Institute for Strategy and Business Economics, University of Zurich)

  • Martin Grossmann

    () (Institute for Strategy and Business Economics, University of Zurich)

  • Markus Lang

    () (Institute for Strategy and Business Economics, University of Zurich)


This paper develops a contest model of a professional sports league in which clubs maximize a weighted sum of profits and wins (utility maximization). The model analyzes how more win-oriented behavior of certain clubs affects talent investments, competitive balance and club profits. Moreover, in contrast to traditional models, we show that revenue sharing does not always reduce investment incentives due to the dulling effect. We identify a new effect of revenue sharing called the "sharpening effect". In the presence of the sharpening effect (dulling effect), revenue sharing enhances (reduces) investment incentives and improves (deteriorates) competitive balance in the league.

Suggested Citation

  • Helmut Dietl & Martin Grossmann & Markus Lang, 2009. "Competitive Balance and Revenue Sharing in Sports Leagues with Utility-Maximizing Teams," Working Papers 0033, University of Zurich, Center for Research in Sports Administration (CRSA), revised Jun 2010.
  • Handle: RePEc:rsd:wpaper:0033

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    References listed on IDEAS

    1. Helmut M. Dietl & Markus Lang & Stephan Werner, 2009. "Social Welfare in Sports Leagues with Profit-Maximizing and/or Win-Maximizing Clubs," Southern Economic Journal, Southern Economic Association, vol. 76(2), pages 375-396, October.
    2. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603, June.
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    4. 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.
    5. Dana Sisak, 2009. "Multiple-Prize Contests - The Optimal Allocation Of Prizes," Journal of Economic Surveys, Wiley Blackwell, vol. 23(1), pages 82-114, February.
    6. Helmut M. Dietl & Markus Lang & Alexander Rathke, 2011. "The Combined Effect Of Salary Restrictions And Revenue Sharing In Sports Leagues," Economic Inquiry, Western Economic Association International, vol. 49(2), pages 447-463, April.
    7. Richard Schmalensee, 1976. "A Model of Promotional Competition in Oligopoly," Review of Economic Studies, Oxford University Press, vol. 43(3), pages 493-507.
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    10. Martin Grossmann & Helmut M. Dietl, 2009. "Investment Behaviour in a Two-Period Contest Model," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(3), pages 401-417, September.
    11. Martin Grossmann & Helmut Dietl, 2012. "Asymmetric contests with liquidity constraints," Public Choice, Springer, vol. 150(3), pages 691-713, March.
    12. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-622, May.
    13. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, Elsevier.
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    Cited by:

    1. Pamela Wicker & Christian Weingärtner & Christoph Breuer & Helmut Dietl, 2012. "The Effect of a Sports Institution’s Legal Structure on Sponsorship Income: The Case of Amateur Equestrian Sports in Germany," International Journal of Sport Finance, Fitness Information Technology, vol. 7(4), pages 340-357, November.
    2. Martin Grossmann, 2015. "Evolutionarily Stable Strategies in Sports Contests," Journal of Sports Economics, , vol. 16(1), pages 108-121, January.
    3. Yvon Rocaboy, 2017. "Competition Among National Football Leagues. Does It Exist? Should We Regulate?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(1), pages 88-114, February.
    4. Hayley Jang & Young Hoon Lee, 2016. "A Business Analysis of Asian Baseball Leagues," Asian Economic Policy Review, Japan Center for Economic Research, vol. 11(1), pages 95-112, January.
    5. Martina Gianecchini & Alberto Alvisi, 2015. "Late career of superstar soccer players: win, play, or gain?," "Marco Fanno" Working Papers 0192, Dipartimento di Scienze Economiche "Marco Fanno".
    6. Halicioglu, Ferda, 2012. "An empirical study of relationship between FIFA world ranking and domestic football competition level: the case of Turkey," MPRA Paper 35662, University Library of Munich, Germany.
    7. Eddy, Terry, 2014. "Measuring effects of naming-rights sponsorships on college football fans’ purchasing intentions," Sport Management Review, Elsevier, vol. 17(3), pages 362-375.
    8. Caruso, Raul & Addesa, Francesco & Di Domizio, Marco, 2016. "The Determinants Of The TV Demand Of Soccer: Empirical Evidence On Italian Serie A For The Period 2008-2015," MPRA Paper 70189, University Library of Munich, Germany.
    9. Helmut Dietl & Rodney Fort & Markus Lang, 2011. "International Sports League Comparisons," Working Papers 0042, University of Zurich, Center for Research in Sports Administration (CRSA).
    10. Peter Sloane, 2014. "Club objectives," Chapters,in: Handbook on the Economics of Professional Football, chapter 1, pages 13-22 Edward Elgar Publishing.

    More about this item


    Competitive balance; contest; invariance proposition; objective function; revenue sharing; team sports league; utility maximization;

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games


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