Competitive Balance and Revenue Sharing in Sports Leagues with Utility-Maximizing Teams

Helmut Dietl, Martin Grossmann and Markus Lang

No 1006, Working Papers from International Association of Sports Economists, North American Association of Sports Economists

Abstract: 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-orientated behavior of certain clubs affects talent investments, competitive balance and club profits. Moreover, in contrast to traditional models, we show that revenue sharing does not always reduce investment incentives due to the dulling effect. We 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.

Keywords: Competitive balance; contest; invariance proposition; objective function; revenue sharing; team sports league; utility maximization (search for similar items in EconPapers)
JEL-codes: C72 D43 L83 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2010-10
New Economics Papers: this item is included in nep-ind and nep-spo
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Related works:
Journal Article: Competitive Balance and Revenue Sharing in Sports Leagues With Utility-Maximizing Teams (2011)
Working Paper: Competitive Balance and Revenue Sharing in Sports Leagues with Utility-Maximizing Teams (2010)
Working Paper: Competitive Balance and Revenue Sharing in Sports Leagues with Utility-Maximizing Teams (2010)
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