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

Dobson, Stephen; Goddard, John

Authors

Stephen Dobson

John Goddard

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.

Journal Article Type Article
Publication Date 2014
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
Institution 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.2014.46052
DOI https://doi.org/10.4236/tel.2014.46052
Keywords Professional team sports; Revenue sharing; Competitive inequality
Publisher URL https://www.scirp.org/journal/PaperInformation.aspx?PaperID=46831
Copyright Statement Copyright © 2014 by authors and Scientific Research Publishing Inc.This work is licensed under the Creative Commons Attribution International License (CC BY).http://creativecommons.org/licenses/by/4.0/
Additional Information This is a copy of an open access article published in Theoretical economics letters, 2014, v.4 issue 6.

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Copyright Statement
Copyright © 2014 by authors and Scientific Research Publishing Inc.This work is licensed under the Creative Commons Attribution International License (CC BY).http://creativecommons.org/licenses/by/4.0/




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