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

Helmut Dietl, Martin Grossmann and Markus Lang

Journal of Sports Economics, 2011, vol. 12, issue 3, 284-308

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-oriented behavior of certain clubs affects talent investments, competitive balance, and club profits. Moreover, in contrast to traditional models, the authors show that revenue sharing does not always reduce investment incentives due to the dulling effect. The authors 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; revenue sharing; team sports league; utility maximization (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (37)

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Related works:
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)
Working Paper: Competitive Balance and Revenue Sharing in Sports Leagues with Utility-Maximizing Teams (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:jospec:v:12:y:2011:i:3:p:284-308

DOI: 10.1177/1527002511404787

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