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

Stephen T. Easton and Duane Rockerbie ()

Industrial Organization from EconWPA

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.

Keywords: revenue; sharing; conjectures; sports; league; voting; profit (search for similar items in EconPapers)
JEL-codes: L83 (search for similar items in EconPapers)
Date: 2003-03-23
Note: Type of Document - MSWord/pdf; prepared on IBM PC ; to print on HP; pages: 29 ; figures: included
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0303010

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