Long-term Competitive Balance under UEFA Financial Fair Play Regulations
Markus Sass ()
Additional contact information
Markus Sass: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg
No 120005, FEMM Working Papers from Otto-von-Guericke University Magdeburg, Faculty of Economics and Management
This paper analyzes the long-term development of competitive balance in a professional team sports league with win-maximizing clubs facing a strict break-even constraint as imposed by UEFA's new Financial Fair Play Regulations. A classical model of professional team sports leagues is employed to calculate seasonal competitive balance, which solely depends on the market size of clubs. In the multi-period version of the model, a market size function, which captures the empirical fact that a club's revenue potential is positively affected by its historic success, is introduced. The model shows that there is only one long-term steady-state equilibrium, in which big clubs totally dominate small clubs and competitive balance is maximally uneven. The intuition is that a club, which becomes more successful, is able to attract more and more spectators yielding higher revenue and leading to the club being able to afford more playing talent. This in turn leads to greater success, which in turn attracts even more spectators and so forth. Since small clubs are no longer allowed to overspend and thereby invest their way to a greater market size in the future, the model predicts a negative trend in competitive balance to be the result of the new UEFA Financial Fair Play Regulations.
Keywords: Sports Economics; Professional Team Sports; Competitive Balance; UEFA Financial Fair Play (search for similar items in EconPapers)
JEL-codes: L83 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-spo
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
http://www.fww.ovgu.de/fww_media/femm/femm_2012/2012_05.pdf First version, 2012 (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:mag:wpaper:120005
Access Statistics for this paper
More papers in FEMM Working Papers from Otto-von-Guericke University Magdeburg, Faculty of Economics and Management Contact information at EDIRC.
Series data maintained by Guido Henkel ().