Revenue sharing in professional sports leagues: for the sake of competitive balance or as a result of monopsony power?

Frederic Palomino and József Sákovics

Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

Abstract: We analyze the distribution of broadcasting revenues by sports leagues. In the context of an isolated league, we show that when the teams engage in competitive bidding to attract talent, the league's optimal choice is full revenue sharing (resulting in full competitive balance) even if the revenues are independent of the level of balancedness. This result is overturned when the league has no monopsony power in the talent market. When the teams of two different leagues bid for talent, the equilibrium level of revenue sharing is bounded away from sharing of revenues: leagues choose a performance-based reward scheme. Finally, we argue that our model explains he observed differences in revenue sharing rules used by the U.S. sports leagues (full revenue sharing) and European soccer leagues (performance-based reward).

Pages: 25
Date: 2000-06
New Economics Papers: this item is included in nep-com and nep-spo
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.econ.ed.ac.uk/papers/id59_esedps.pdf

Related works:
Working Paper: Revenue Sharing in Professional Sports Leagues: For the Sake of Competitive Balance or as a Result of Monopsony Power? (2000)
Working Paper: Revenue Sharing in Professional Sports Leagues: For the Sake of Competitive Balance or as a Result of Monopsony Power? (2000)
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:edn:esedps:59

Access Statistics for this paper

More papers in Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh 31 Buccleuch Place, EH8 9JT, Edinburgh. Contact information at EDIRC.
Bibliographic data for series maintained by Research Office ().