Salary Cap Regulation in Professional Team Sports

Helmut Dietl, Egon Franck, Markus Lang and Alexander Rathke

No 86, Working Papers from University of Zurich, Institute for Strategy and Business Economics (ISU)

Abstract: This paper analyzes the effects of a percentage-of-revenue salary cap in a team sports league with win-maximizing clubs and flexible talent supply. It shows that a percentage-of-revenue cap produces a more balanced league and decreases aggregate salary payments. Taking into account the idiosyncrasies of European football, our paper further highlights the potential conflicts between the league and society. From the perspective of a league governing body, a percentage-of-revenue cap always enhances financial stability of win-maximizing clubs. A social planner, however, will not permit the introduction of such a cap if fans and players unduly suffer. This paper shows under which conditions the social planner accepts (rejects) a salary cap proposed by the league regulator.

Keywords: Competitive balance; regulation; salary cap; social welfare; team sports leagues (search for similar items in EconPapers)
JEL-codes: D02 D60 L83 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2008-07, Revised 2010-11
New Economics Papers: this item is included in nep-mic and nep-spo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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http://repec.business.uzh.ch/RePEc/iso/ISU_WPS/86_ISU_full.pdf (application/pdf)

Related works:
Journal Article: SALARY CAP REGULATION IN PROFESSIONAL TEAM SPORTS (2012)
Working Paper: Salary Cap Regulation in Professional Team Sports (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:iso:wpaper:0086

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