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Fundamentals and Optimal Institutions: The case of US sports leagues

Author

Listed:
  • Martín González Eiras

    (University of Copenhagen)

  • Nikolaj A. Harmon

    (University of Copenhagen)

  • Martín Rossi

    (Department of Economics, Universidad de San Andres)

Abstract

To shed light on the relation between fundamentals and adopted institutions we examine institutional choice across the \Big Four" US sports leagues. Despite having very similar business models and facing the same economic and legal environment, these leagues exhibit large differences in their use of regulatory institutions such as revenue sharing, salary caps or luxury taxes. We show, theoretically and empirically, that these institutional differences can be rationalized as optimal responses to differences in the fundamental characteristics of the sports being played. This provides a cautionary tale against trying to transplant successful institutions across different economic settings.

Suggested Citation

  • Martín González Eiras & Nikolaj A. Harmon & Martín Rossi, 2017. "Fundamentals and Optimal Institutions: The case of US sports leagues," Working Papers 128, Universidad de San Andres, Departamento de Economia, revised Jan 2017.
    • Handle: RePEc:sad:wpaper:128
    as

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    File URL: https://webacademicos.udesa.edu.ar/pub/econ/doc128.pdf
    File Function: First version, 2017
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    References listed on IDEAS

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    Cited by:

    1. G. A. Katin & A. A. Furenko, 2021. "Formation of a range of sports league services," Entrepreneur’s Guide, JSC “Publishing Agency “Science and Educationâ€, vol. 14(4).

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    More about this item

    Keywords

    regulations; institutional choice; sport economics; win probability;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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