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

Helmut Dietl, Martin Grossmann and Markus Lang ()

No 118, Working Papers from University of Zurich, Institute for Strategy and Business Economics (ISU)

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, we show that revenue sharing does not always reduce investment incentives due to the dulling effect. We 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; objective function; revenue sharing; team sports league; utility maximization (search for similar items in EconPapers)
JEL-codes: L83 D43 C72 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic and nep-spo
Date: 2009-12, Revised 2010-06
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Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
http://repec.business.uzh.ch/RePEc/iso/ISU_WPS/118_ISU_full.pdf (application/pdf)

Related works:
Journal Article: Competitive Balance and Revenue Sharing in Sports Leagues With Utility-Maximizing Teams (2011) Downloads
Working Paper: Competitive Balance and Revenue Sharing in Sports Leagues with Utility-Maximizing Teams (2010) Downloads
Working Paper: Competitive Balance and Revenue Sharing in Sports Leagues with Utility-Maximizing Teams (2010) Downloads
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