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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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    References listed on IDEAS

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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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