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Revenue Sharing with Heterogeneous Investments in Sports Leagues: Share Media, Not Stadiums

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  • Steven Salaga
  • Alan Ostfield
  • Jason Winfree

Abstract

This study examines revenue sharing in sports leagues where franchises engage in multiple types of investments. Previous literature typically treats revenues and investments as homogeneous, but we add to the literature by differentiating between investment types and revenue sources. This is important because investment in talent leads to winning, which is a zero-sum game for the league and therefore owners have an incentive to limit talent investment. However, other investments, such as stadiums, are not a zero-sum game, and therefore the implications of revenue sharing are different for the league. We provide sufficient conditions under which it is more efficient to share media revenue compared to stadium revenue. We conclude by providing applications of this model. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Steven Salaga & Alan Ostfield & Jason Winfree, 2014. "Revenue Sharing with Heterogeneous Investments in Sports Leagues: Share Media, Not Stadiums," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 45(1), pages 1-19, August.
    • Handle: RePEc:kap:revind:v:45:y:2014:i:1:p:1-19
    DOI: 10.1007/s11151-014-9423-2
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    Cited by:

    1. Jason A. Winfree, 2021. "If You Don'T Like The Outcome, Change The Contest," Economic Inquiry, Western Economic Association International, vol. 59(1), pages 329-343, January.
    2. Brian Mills & Jason Winfree, 2018. "Athlete Pay and Competitive Balance in College Athletics," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(2), pages 211-229, March.
    3. Miceli, Thomas J., 2024. "Patent races and pennant races: A new rationale for revenue sharing in sports leagues," Economics Letters, Elsevier, vol. 234(C).
    4. Eremin, G., 2018. "Analysis of Factors Influencing the Pricing of Transfers in European Professional Football," Journal of the New Economic Association, New Economic Association, vol. 40(4), pages 174-183.
    5. Thomas Peeters, 2015. "Profit-Maximizing Gate Revenue Sharing In Sports Leagues," Economic Inquiry, Western Economic Association International, vol. 53(2), pages 1275-1291, April.
    6. Brian M. Mills & Michael Mondello & Scott Tainsky, 2016. "Competition in shared markets and Major League Baseball broadcast viewership," Applied Economics, Taylor & Francis Journals, vol. 48(32), pages 3020-3032, July.

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    More about this item

    Keywords

    Sports leagues; Investment; Revenue sharing; L83;
    All these keywords.

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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