Losing money to make money: The benefits of redistribution in collective bargaining in sports

Akhil Vohra

Games and Economic Behavior, 2023, vol. 142, issue C, 226-242

Abstract: I develop a model of majority-rule collective bargaining between a sports league and its players when delay costs incurred by players are wealth-dependent. I propose a refinement of subgame perfect equilibrium that requires equilibrium strategies to be immune to deviations by any majority subgroup. I show this is equivalent to giving the player with median bargaining power the unilateral ability to negotiate with the league. Using this model, I demonstrate that policies reallocating surplus from high-talent to moderate-talent players, such as maximum contracts in professional sports, can improve the welfare of all players. Redistribution of surplus harmonizes players' interests, giving a majority of them a greater stake in the bargaining outcome. The model highlights the gains to be had if a heterogeneous group agrees to concessions that increase the alignment of their individual interests.

Keywords: Majority-rule bargaining; Collective bargaining; Negotiation; Unions (search for similar items in EconPapers)
JEL-codes: C7 D7 J5 Z22 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:142:y:2023:i:c:p:226-242

DOI: 10.1016/j.geb.2023.08.006

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