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Revenue Sharing and Competitive Balance in a Dynamic Contest Model

Author

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  • Martin Grossmann

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

  • Helmut Dietl

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

  • Markus Lang

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

Abstract

This paper presents a dynamic model of talent investments in a team sports league with an infinite time horizon. We show that the clubs' investment decisions and the effects of revenue sharing on competitive balance depend on the following three factors: (i) the cost function of talent investments, (ii) the clubs' market sizes, and (iii) the initial endowments of talent stock. We analyze how these factors interact in the transition to the steady state as well as in the steady state itself.

Suggested Citation

  • 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.
  • Handle: RePEc:spe:wpaper:0822
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    File URL: http://web.holycross.edu/RePEc/spe/GrossmannDietlLang_DynamicRevenueSharing.pdf
    File Function: Revised version, 2009
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Grossmann Martin & Lang Markus & Dietl Helmut, 2011. "Transitional Dynamics in a Tullock Contest with a General Cost Function," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-26, August.
    2. Oliver Guertler & Markus Lang & Tim Pawlowski, 2011. "On the Release of Players to National Teams," Working Papers 0046, University of Zurich, Center for Research in Sports Administration (CRSA).
    3. Markus Lang & Martin Grossmann & Philipp Theiler, 2011. "The Sugar Daddy Game: How Wealthy Investors Change Competition in Professional Team Sports," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(4), pages 557-577, December.
    4. XiaoGang Che & Brad Humphreys, 2015. "Competition Between Sports Leagues: Theory and Evidence on Rival League Formation in North America," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(2), pages 127-143, March.
    5. Martin Grossmann, 2011. "Endogenous Liquidity Constraints in a Dynamic Contest," Working Papers 0148, University of Zurich, Institute for Strategy and Business Economics (ISU).
    6. Helmut Dietl & Egon Franck & Markus Lang & Alexander Rathke, 2010. "Organizational Differences between U.S. Major Leagues and European Leagues: Implications for Salary Caps," Working Papers 0122, University of Zurich, Institute for Strategy and Business Economics (ISU).
    7. Egon Franck & Markus Lang, 2014. "A Theoretical Analysis of the Influence of Money Injections on Risk Taking in Football Clubs," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(4), pages 430-454, September.
    8. Helmut Dietl & Tobias Duschl & Markus Lang, 2010. "Gehaltsobergrenzen und Luxussteuern: Erkenntnisse aus dem professionellen Mannschaftssport," Working Papers 0039, University of Zurich, Center for Research in Sports Administration (CRSA).
    9. Martin Grossmann & Andreas Hefti & Markus Lang, 2012. "Aggregative Contests and Ex-post Heterogeneity: the Case of the UEFA Champions League," Working Papers 0161, University of Zurich, Institute for Strategy and Business Economics (ISU).
    10. Markus LANG & Alexander RATHKE & Marco RUNKEL, 2010. "The Economic Consequences Of Foreigner Rules In National Sports Leagues," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 31, pages 47-64.
    11. Helmut Dietl & Egon Franck & Martin Grossmann & Markus Lang, 2009. "Contest Theory and its Applications in Sports," Working Papers 0029, University of Zurich, Center for Research in Sports Administration (CRSA).

    More about this item

    Keywords

    Contest; Sports Economics; Competitive Balance; Revenue Sharing;

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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