EconPapers    
Economics at your fingertips  
 

Pool Revenue Sharing, Team Investments, and Competitive Balance in Professional Sports A Theoretical Analysis

Yang-Ming Chang () and Shane Sanders

Journal of Sports Economics, 2009, vol. 10, issue 4, 409-428

Abstract: Using a contest model of a professional sports league, we show that pool revenue sharing has a negative effect on total expenditure for player talent. There are ``moral hazard'' problems with lower revenue teams in that they may pocket the money they receive from the pool without increasing talent investments. Based on four alternative measures of competitive balance, we find that pool revenue sharing increases the variance of expected winning percentages for a match and thus reduces the degree of competition in the league. Policy recommendations that combine pool revenue sharing with the requirement of a minimum payroll on players are shown to be procompetitive.

Keywords: pool revenue sharing; competitive balance; professional sports league (search for similar items in EconPapers)
Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://jse.sagepub.com/content/10/4/409.abstract (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:jospec:v:10:y:2009:i:4:p:409-428

Access Statistics for this article

More articles in Journal of Sports Economics
Bibliographic data for series maintained by SAGE Publications ().

 
Page updated 2020-03-29
Handle: RePEc:sae:jospec:v:10:y:2009:i:4:p:409-428