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The Sugar Daddy's Game: How Wealthy Investors Change Competition in Professional Team Sports

  • Markus Lang

    ()

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

  • Martin Grossmann

    ()

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

  • Philipp Theiler

    ()

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

Professional sports leagues have witnessed the appearance of so-called "sugar daddies" - people who invest enormous amounts of money into clubs and become their owners. This paper presents a contest model of a professional sports league that incorporates this phenomenon. We analyze how the appearance of a sugar daddy alters competitive balance and social welfare compared to a league with purely profit-maximizing club owners. We further show that the welfare effect of revenue sharing in a sugar daddy league is ambiguous and depends on the degree of redistribution and on whether the sugar daddy invests in a small or large club.

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File URL: http://college.holycross.edu/RePEc/spe/LangGrossmannTheiler_SugarDaddy.pdf
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Paper provided by International Association of Sports Economists & North American Association of Sports Economists in its series Working Papers with number 1107.

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Length: 24 pages
Date of creation: Mar 2011
Date of revision: Mar 2011
Handle: RePEc:spe:wpaper:1107
Contact details of provider: Web page: http://www.cdes.fr/index.php?id=fr69

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  11. Martin Grossmann & Helmut Dietl & Markus Lang, 2007. "Revenue Sharing and Competitive Balance in a Dynamic Contest Model," Working Papers 0070, University of Zurich, Institute for Strategy and Business Economics (ISU), revised May 2009.
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  15. Flynn, Michael A & Gilbert, Richard J, 2001. "The Analysis of Professional Sports Leagues as Joint Ventures," Economic Journal, Royal Economic Society, vol. 111(469), pages F27-46, February.
  16. 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).
  17. Thomas Hoehn & Stefan Szymanski, 1999. "The Americanization of European football," Economic Policy, CEPR;CES;MSH, vol. 14(28), pages 203-240, 04.
  18. 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.
  19. Stefan Kesenne, 2000. "Revenue Sharing and Competitive Balance in Professional Team Sports," Journal of Sports Economics, , vol. 1(1), pages 56-65, February.
  20. Sonia Falconieri & Frédéric Palomino & József Sákovics, 2004. "Collective Versus Individual Sale of Television Rights in League Sports," Journal of the European Economic Association, MIT Press, vol. 2(5), pages 833-862, 09.
  21. E. Woodrow Eckard, 2006. "Comment: "Professional Team Sports Are Only a Game: The Walrasian Fixed-Supply Conjecture Model, Contest-Nash Equilibrium, and the Invariance Principle"," Journal of Sports Economics, , vol. 7(2), pages 234-239, May.
  22. Scott E. Atkinson & Linda R. Stanley & John Tschirhart, 1988. "Revenue Sharing as an Incentive in an Agency Problem: An example from the National Football League," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 27-43, Spring.
  23. 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.
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