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Revenue Sharing, Conjectures, and Scarce Talent in a Model of a Professional Sports League

Author

Listed:
  • Stephen Easton

    (Simon Fraser University)

  • Duane Rockerbie

    (University of Lethbridge)

Abstract

We develop a model of a representative professional sports club that has the option of adopting one of two different forms of revenue sharing: traditional revenue sharing and central pool type revenue sharing. To adopt either form of revenue sharing, the league requires that a majority of clubs increase profit with adoption of the plan. We derive necessary conditions for either plan to garner enough support for a majority vote. The likelihood of forming a majority on the conjectures on acquiring talent that clubs possess. Competitive conjectures make revenue sharing more likely, while cartel conjectures make revenue sharing less likely. Empirical results provide evidence in favor of the model for four North American professional sports leagues.

Suggested Citation

  • Stephen Easton & Duane Rockerbie, 2003. "Revenue Sharing, Conjectures, and Scarce Talent in a Model of a Professional Sports League," Industrial Organization 0303010, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpio:0303010
    Note: Type of Document - MSWord/pdf; prepared on IBM PC ; to print on HP; pages: 29 ; figures: included
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    References listed on IDEAS

    as
    1. 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.
    2. Daniel Rascher, 1997. "A model of a professional sports league," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 3(3), pages 327-328, August.
    3. Daniel R. Marburger, 1997. "Gate Revenue Sharing And Luxury Taxes In Professional Sports," Contemporary Economic Policy, Western Economic Association International, vol. 15(2), pages 114-123, April.
    4. Stefan Kesenne, 2000. "Revenue Sharing and Competitive Balance in Professional Team Sports," Journal of Sports Economics, , vol. 1(1), pages 56-65, February.
    5. Frederic Palomino and Luca Rigotti., 2000. "The Sport League's Dilemma: Competitive Balance versus Incentives to Win," Economics Working Papers E00-292, University of California at Berkeley.
    6. Peter J. Sloane, 2000. "The Regulation of Professional Team Sports," IASE Conference Papers 0003, International Association of Sports Economists.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    revenue sharing conjectures sports league voting profit;

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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