Research Notes: An Economic Model of Player Trade in Professional Sports

Kjetil Haugen

Journal of Sports Economics, 2006, vol. 7, issue 3, 309-318

Abstract: This article addresses the problem of competitive balance within a sports league. As opposed to standard literature on the subject, a direct game theoretic approach is made to predict trade between two marginally different teams. The main results may be summed up by proven existence of unique pure-strategy Nash equilibria that form player trade. These Nash equilibria are solely determined by the shape of the revenue function. A convex revenue function yields increased competitive imbalance, while a concave revenue function implies the opposite. The article closes by discussing some central assumptions, and the possible consequences of relaxing them.

Keywords: game theory; player trade; arbitrage; competitive balance (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:sae:jospec:v:7:y:2006:i:3:p:309-318

DOI: 10.1177/1527002504272941

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