Journal
JOURNAL OF SPORTS ECONOMICS
Volume 12, Issue 3, Pages 284-308Publisher
SAGE PUBLICATIONS INC
DOI: 10.1177/1527002511404787
Keywords
competitive balance; contest; invariance proposition; revenue sharing; team sports league; utility maximization
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This paper develops a contest model of a professional sports league in which clubs maximize a weighted sum of profits and wins (utility maximization). The model analyzes how more win-oriented behavior of certain clubs affects talent investments, competitive balance, and club profits. Moreover, in contrast to traditional models, the authors show that revenue sharing does not always reduce investment incentives due to the dulling effect. The authors identify a new effect of revenue sharing called the ''sharpening effect.'' In the presence of the sharpening effect (dulling effect), revenue sharing enhances (reduces) investment incentives and improves (deteriorates) competitive balance in the league.
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