Competition Between Sports Leagues: Theory and Evidence on Rival League Formation in North America

XiaoGang Che () and Brad Humphreys
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XiaoGang Che: University of Alberta, Department of Economics, Postal: 8-14 HM Tory Building, Edmonton, AB, T6G 2H4

No 2012-23, Working Papers from University of Alberta, Department of Economics

Abstract: We analyze the formation of rival leagues in professional team sports, one of the least studied forms of competition in sport. We survey the economic history of professional sports leagues in North America and develop stylized facts about rival league formation and develop a game-theoretic model of entry of a rival league to an existing market to explain these stylized facts. This model accounts for the strategic interaction between the incumbent and rival league and costs associated with acquiring new players from the incumbent league. The model predicts that either expanding to deter rival league formation, or allowing a rival league to form and then merging with that league is a subgame perfect equilibrium, and that incumbent leagues will pay players relatively high salaries to deter entry by a rival league.

Keywords: professional team sports; rival league; monopsony (search for similar items in EconPapers)
JEL-codes: D42 L12 L83 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2012-10-01
New Economics Papers: this item is included in nep-com, nep-his and nep-spo
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Citations: View citations in EconPapers (2)

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Journal Article: Competition Between Sports Leagues: Theory and Evidence on Rival League Formation in North America (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2012_023

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