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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Markus Lang & Martin Grossmann & Philipp Theiler, 2011. "The Sugar Daddy's Game: How Wealthy Investors Change Competition in Professional Team Sports," Working Papers 1107, International Association of Sports Economists;North American Association of Sports Economists, revised Mar 2011.
  • Handle: RePEc:spe:wpaper:1107
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    Cited by:

    1. Paul Madden & Mario Pezzino, 2013. "Sports League Quality, Broadcaster TV Rights Bids and Wholesale Regulation of Sports Channels," Economics Discussion Paper Series 1304, Economics, The University of Manchester.
    2. Oliver Gürtler & Markus Lang & Tim Pawlowski, 2015. "On the Release of Players to National Teams," Journal of Sports Economics, , vol. 16(7), pages 695-713, October.
    3. Paul Madden, 2012. "Welfare Economics of "Financial Fair Play" in a Sports League With Benefactor Owners," Economics Discussion Paper Series 1221, Economics, The University of Manchester.
    4. Helmut M. Dietl & Egon Franck & Markus Lang & Alexander Rathke, 2012. "Salary Cap Regulation In Professional Team Sports," Contemporary Economic Policy, Western Economic Association International, vol. 30(3), pages 307-319, July.
    5. Martin Grossmann, 2015. "Evolutionarily Stable Strategies in Sports Contests," Journal of Sports Economics, , vol. 16(1), pages 108-121, January.
    6. Paul Madden, 2014. "Does Break-Even Regulation of Soccer Clubs Make Sense?," Economics Discussion Paper Series 1405, Economics, The University of Manchester.
    7. John K. Malagila & Alaa M. Zalata & Collins G. Ntim & Ahmed A. Elamer, 2021. "Corporate governance and performance in sports organisations: The case of UK premier leagues," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2517-2537, April.
    8. Koning Ruud H. & Maennig Wolfgang, 2012. "Guest Editorial," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 232(3), pages 204-209, June.
    9. 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.
    10. 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).
    11. Budzinski, Oliver, 2017. "Market-internal financial regulation in sports as an anticompetitive institution," Ilmenau Economics Discussion Papers 110, Ilmenau University of Technology, Institute of Economics.
    12. Budzinski, Oliver, 2014. "The competition economics of financial fair play," Ilmenau Economics Discussion Papers 85, Ilmenau University of Technology, Institute of Economics.
    13. Marc Rohde & Christoph Breuer, 2018. "Competing by investments or efficiency? Exploring financial and sporting efficiency of club ownership structures in European football," Sport Management Review, Taylor & Francis Journals, vol. 21(5), pages 563-581, December.
    14. Youngshin Woo & Wooseok Choi & Insik Min & Mugoan Jeong, 2020. "Korean Business Groups and Performance of Group-Affiliated Professional Sport Teams: Focusing on the Asian Financial Crisis," Sustainability, MDPI, Open Access Journal, vol. 12(17), pages 1-15, August.
    15. Kin-Man Wan & Ka-U Ng & Thung-Hong Lin, 2020. "The Political Economy of Football: Democracy, Income Inequality, and Men’s National Football Performance," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 151(3), pages 981-1013, October.
    16. Kin-Man Wan & Ka-U Ng & Thung-Hong Lin, 0. "The Political Economy of Football: Democracy, Income Inequality, and Men’s National Football Performance," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 0, pages 1-33.
    17. Helmut Dietl & Rodney Fort & Markus Lang, 2011. "International Sports League Comparisons," Working Papers 0042, University of Zurich, Center for Research in Sports Administration (CRSA).
    18. Peter Sloane, 2014. "Club objectives," Chapters, in: John Goddard & Peter Sloane (ed.), Handbook on the Economics of Professional Football, chapter 1, pages 13-22, Edward Elgar Publishing.
    19. Budzinski, Oliver & Kunz-Kaltenhäuser, Philipp, 2020. "Promoting or restricting competition? - The 50plus1-rule in German football," Ilmenau Economics Discussion Papers 141, Ilmenau University of Technology, Institute of Economics.
    20. Helmut Dietl & Markus Lang & Cornel Nesseler, 2017. "The Impact of Government Subsidies in Professional Team Sports Leagues," Working Papers 366, University of Zurich, Department of Business Administration (IBW).
    21. Andrea Rey & Francesco Santelli, 2017. "The Relationship between Financial Ratios and Sporting Performance in Italy’s Serie A," International Journal of Business and Management, Canadian Center of Science and Education, vol. 12(12), pages 1-53, November.
    22. Richau, Lukas & Follert, Florian & Frenger, Monika & Emrich, Eike, 2021. "The Rainmaker?! The impact of investors on transfer fees in the English Premier League," Working Paper 187/2021, Helmut Schmidt University, Hamburg.

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    More about this item

    Keywords

    Competitive balance; contest model; social welfare; sports leagues; sugar daddy;
    All these keywords.

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • 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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