The Effect of Marginal Cost Elasticity on Competitive Balance

Martin Grossmann, Helmut Dietl and Urs Trinkner

Journal of Sports Economics, 2008, vol. 9, issue 4, 339-350

Abstract: This article presents a model of talent investments where two clubs compete for prizes. Our model is based on a general class of cost functions with a constant elasticity of marginal costs with respect to investments. The analysis finds that reduced revenue sharing improves competitive balance. Furthermore, we show that a higher elasticity of marginal costs with respect to investments enhances competitive balance and simultaneously reduces the negative effect of revenue sharing on competitive balance.

Keywords: sports leagues; revenue sharing; competitive balance; contest (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:jospec:v:9:y:2008:i:4:p:339-350

DOI: 10.1177/1527002507310959

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