Competitive balance in sports leagues and the paradox of power

Stefan Szymanski

No 618, Working Papers from International Association of Sports Economists, North American Association of Sports Economists

Abstract: It is generally thought that competitive equilibrium in sports leagues involves too little competitive balance (the strong dominate the weak too much- a more even contest would be more attractive). However, it is possible to sow in a standard logit contest model that the reverse is true – the strong do not win “enough”- i.e. more wins by the strong team would increase attendance or revenues. This is consistent with Hirshleifer’s paradox of power. However, this is only true so long as the strong do not become too dominant- otherwise the regime switches to one of pre-emption: the strong never lose. This paper identifies the conditions under which the paradox of power and pre-emption will manifest themselves.

JEL-codes: L83 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2006-10
New Economics Papers: this item is included in nep-spo
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Citations: View citations in EconPapers (3)

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