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Organizational Differences between U.S. Major Leagues and European Leagues: Implications for Salary Caps

  • Helmut Dietl

    ()

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

  • Egon Franck

    ()

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

  • Markus Lang

    ()

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

  • Alexander Rathke

    ()

    (Institute for Empirical Research in Economics, University of Zurich)

This paper outlines and compares the organizational structure of major sports leagues, explores the reasoning behind their formation, and derives implications for salary caps in European football. To understand why sports leagues have developed a specific organizational structure, one must take the economic peculiarities of team sports leagues into consideration. For this purpose, we analyze the production process and illuminate its major peculiarities. For example, we present the difference between economic competition and competition on the pitch and discuss the consequences of this distinction for an attractive final product. Furthermore, we show that a hold-up problem exists between the two stages of the production process and demonstrate how these problems are overcome by the organizational structure chosen by sports leagues. We also outline the differences between the U.S. major leagues and European leagues and document recent developments in that context. Finally, based on this comparative institutional analysis, we derive implications for the introduction of salary caps into European football.

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Paper provided by University of Zurich, Center for Research in Sports Administration (CRSA) in its series Working Papers with number 0035.

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Date of creation: Mar 2010
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Handle: RePEc:rsd:wpaper:0035
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  1. Liam J. A. Lenten, 2008. "Unbalanced Schedules And The Estimation Of Competitive Balance In The Scottish Premier League," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(4), pages 488-508, 09.
  2. Peter J. Sloane, 2000. "The Regulation of Professional Team Sports," IASE Conference Papers 0003, International Association of Sports Economists.
  3. Feess, Eberhard & Muehlheusser, Gerd, 2003. "Transfer fee regulations in European football," European Economic Review, Elsevier, vol. 47(4), pages 645-668, August.
  4. Helmut Dietl & Markus Lang & Alexander Rathke, 2009. "The Combined Effect of Salary Restrictions and Revenue Sharing in Sports Leagues," Working Papers 0102, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Jan 2010.
  5. 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.
  6. Helmut Dietl & Markus Lang & Alexander Rathke, 2007. "The Effect of Salary Caps in Professional Team Sports on Social Welfare," Working Papers 0072, University of Zurich, Institute for Strategy and Business Economics (ISU).
  7. Stefan Kesenne, 2000. "Revenue Sharing and Competitive Balance in Professional Team Sports," Journal of Sports Economics, , vol. 1(1), pages 56-65, February.
  8. Stefan Szymanski, 2003. "The Economic Design of Sporting Contests," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1137-1187, December.
  9. Helmut Dietl & Egon Franck & Markus Lang, 2005. "Overinvestment in Team Sports Leagues: A Contest Theory Model," Working Papers 0002, University of Zurich, Center for Research in Sports Administration (CRSA), revised 2007.
  10. Pedro Garcia-del-Barrio & Stefan Szymanski, 2006. "Goal! Profit maximization and win maximization in football leagues," Working Papers 0621, International Association of Sports Economists;North American Association of Sports Economists.
  11. Helmut Dietl & Egon Franck & Markus Lang, 2008. "Why football players may benefit from the ‘shadow of the transfer system’," European Journal of Law and Economics, Springer, vol. 26(3), pages 419-419, December.
  12. KÉSENNE, Stefan, . "The salary cap proposal of the G-14 in European football," Working Papers 2003018, University of Antwerp, Faculty of Applied Economics.
  13. Sloane, Peter J, 1971. "The Economics of Professional Football: The Football Club as a Utility Maximiser," Scottish Journal of Political Economy, Scottish Economic Society, vol. 18(2), pages 121-46, June.
  14. Daniel R. Marburger, 1997. "Gate Revenue Sharing And Luxury Taxes In Professional Sports," Contemporary Economic Policy, Western Economic Association International, vol. 15(2), pages 114-123, 04.
  15. Helmut Dietl & Egon Franck & Markus Lang & Alexander Rathke, 2008. "Salary Cap Regulation in Professional Team Sports," Working Papers 0086, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Nov 2010.
  16. Helmut Dietl & Egon FrancK & Markus Lang & Alexander Rathke, 2008. "Welfare Effects of Salary Caps in Sports Leagues with Win-Maximizing Clubs," Working Papers 0825, International Association of Sports Economists;North American Association of Sports Economists.
  17. John Vrooman, 2007. "Theory Of The Beautiful Game: The Unification Of European Football," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(3), pages 314-354, 07.
  18. Markus Lang & Alexander Rathke & Marco Runkel, 2009. "The Economic Consequences of Foreigner Rules in National Sports Leagues," Working Papers 0103, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Jul 2009.
  19. Helmut Dietl & Egon Franck & Tariq Hasan & Markus Lang, 2006. "Governance of Professional Sports Leagues - Cooperatives versus Contracts," Working Papers 0011, University of Zurich, Center for Research in Sports Administration (CRSA), revised 2007.
  20. Helmut Dietl & Markus Lang, 2006. "The Effect of Gate Revenue-Sharing on Social Welfare," Working Papers 0012, University of Zurich, Center for Research in Sports Administration (CRSA), revised 2007.
  21. Martin Grossmann & Helmut Dietl & Markus Lang, 2008. "Revenue Sharing and Competitive Balance in a Dynamic Contest Model," Working Papers 0822, International Association of Sports Economists;North American Association of Sports Economists, revised Nov 2009.
  22. Rodney Fort & James Quirk, 2010. "Optimal Competitive Balance in Single-Game Ticket Sports Leagues," Journal of Sports Economics, , vol. 11(6), pages 589-601, December.
  23. Stefan Szymanski & Stephen F. Ross, 2007. "Governance And Vertical Integration In Team Sports," Contemporary Economic Policy, Western Economic Association International, vol. 25(4), pages 616-626, October.
  24. KÉSENNE, Stefan, . "The impact of salary caps in professional team sports," Working Papers 1999026, University of Antwerp, Faculty of Applied Economics.
  25. Liam J. A. Lenten, 2009. "Unobserved Components in Competitive Balance and Match Attendances in the Australian Football League, 1945-2005: Where is all the Action Happening?," The Economic Record, The Economic Society of Australia, vol. 85(269), pages 181-196, 06.
  26. SZYMANSKI, Stefan & KÉSENNE, Stefan, 2003. "Competitive balance and gate revenue sharing in team sports," Working Papers 2003003, University of Antwerp, Faculty of Applied Economics.
  27. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  28. Simon Rottenberg, 1956. "The Baseball Players' Labor Market," Journal of Political Economy, University of Chicago Press, vol. 64, pages 242.
  29. Allen R. Sanderson & John J. Siegfried, 2003. "Thinking About Competitive Balance," Vanderbilt University Department of Economics Working Papers 0318, Vanderbilt University Department of Economics.
  30. Bernd Frick, 2007. "The Football Players' Labor Market: Empirical Evidence From The Major European Leagues," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(3), pages 422-446, 07.
  31. Jeffery Borland, 2003. "Demand for Sport," Oxford Review of Economic Policy, Oxford University Press, vol. 19(4), pages 478-502, Winter.
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