Theory of the Perfect Game: Competitive Balance in Monopoly Sports Leagues
- 1.5k Downloads
Based on the limiting assumption that sports owners are profit maximizers the invariance proposition holds that revenue sharing has no impact on competitive balance in sports leagues. If owners are win-maximizing sportsmen instead, then revenue sharing can lead to increased competitive balance and higher payrolls. Evidence of the sportsman effect is provided by erosion of monopsonistic exploitation in the four major American sports leagues where players now share about 60% of revenues. Monopsony power erosion forces sports-league cartels to exploit statutory monopoly power in monster deals for media rights fees and public venue subsidies. New evidence on competitive balance suggests that revenue sharing leads to increased balance with or without team salary caps. Optimum competitive balance is an empirical question, and the answer lies between random competition of the NFL and deterministic dynasties of the NBA.
KeywordsProfessional sports leagues Competitive balance
Unable to display preview. Download preview PDF.
- Fort R., Quirk J. (1995) Cross-subsidization, incentives, and outcomes in professional team sports leagues. Journal of Economic Literature, 33(3): 1265–1299Google Scholar
- Kesenne S. (1996) League management in professional team sports with win maximizing clubs. European Journal for Sports Management, 2: 14–22Google Scholar
- Quirk J., El Hodiri M. (1974) The economic theory of a professional sports league. In: Noll R.(eds) Government and the Sports Business.. Brookings, Washington DC, pp 33–80Google Scholar
- Quirk J., Fort R. (1992) Pay Dirt: The Business of Professional Team Sports. Princeton University Press, Princeton, NJGoogle Scholar