Revenue sharing in a sports league with an open market in playing talent

Dobson, Stephen; Goddard, John

Abstract

In this paper we develop an economic model of a professional sports league, in which the teams acquire playing talent in an external market. There have been several earlier formulations of this open model and all rely upon an inappropriately specified revenue function. Team revenues should depend upon the absolute quality of the teams, as well as their relative quality measured by win-percent. An inference that has been cited widely in this literature is that revenue sharing increases competitive inequality. We show that this analysis is flawed. If the revenue function is specified appropriately, gate revenue sharing always reduces competitive inequality.

Citation

Dobson, S., & Goddard, J. (2014). Revenue sharing in a sports league with an open market in playing talent. Theoretical Economics Letters, 4(6), 410-414. https://doi.org/10.4236/tel.[phone]

• Journal Article Type: Article
• Acceptance Date: Apr 23, 2014
• Publication Date: 2014
• Deposit Date: Jul 7, 2017
• Publicly Available Date: Jul 7, 2017
• Journal: Theoretical economics letters
• Print ISSN: 2162-2078
• Electronic ISSN: 2162-2086
• Publisher: Scientific Research Publishing
• Peer Reviewed: Peer Reviewed
• Volume: 4
• Issue: 6
• Pages: 410-414
• DOI: https://doi.org/10.4236/tel.[phone]
• Keywords: Professional team sports; Revenue sharing; Competitive inequality
• Public URL: https://hull-repository.worktribe.com/output/453423
• Publisher URL: https://www.scirp.org/journal/PaperInformation.aspx?PaperID=46831
• Additional Information: This is a copy of an open access article published in Theoretical economics letters, 2014, v.4 issue 6.