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Research Notes: An Economic Model of Player Trade in Professional Sports

Author

Listed:
  • Kjetil K. Haugen

    (Molde College)

Abstract

This article addresses the problem of competitive balance within a sports league. As opposed to standard literature on the subject, a direct game theoretic approach is made to predict trade between two marginally different teams. The main results may be summed up by proven existence of unique pure-strategy Nash equilibria that form player trade. These Nash equilibria are solely determined by the shape of the revenue function. A convex revenue function yields increased competitive imbalance, while a concave revenue function implies the opposite. The article closes by discussing some central assumptions, and the possible consequences of relaxing them.

Suggested Citation

  • Kjetil K. Haugen, 2006. "Research Notes: An Economic Model of Player Trade in Professional Sports," Journal of Sports Economics, , vol. 7(3), pages 309-318, August.
    • Handle: RePEc:sae:jospec:v:7:y:2006:i:3:p:309-318
    DOI: 10.1177/1527002504272941
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    References listed on IDEAS

    as
    1. Stefan Késenne, 2000. "The Impact of Salary Caps in Professional Team Sports," Scottish Journal of Political Economy, Scottish Economic Society, vol. 47(4), pages 422-430, September.
    2. Stefan Késenne, 2005. "Revenue Sharing and Competitive Balance," Journal of Sports Economics, , vol. 6(1), pages 98-106, February.
    3. Rodney Fort & James Quirk, 1995. "Cross-subsidization, Incentives, and Outcomes in Professional Team Sports Leagues," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1265-1299, September.
    4. El-Hodiri, Mohamed & Quirk, James, 1971. "An Economic Model of a Professional Sports League," Journal of Political Economy, University of Chicago Press, vol. 79(6), pages 1302-1319, Nov.-Dec..
    5. Hausman, Jerry A & Leonard, Gregory K, 1997. "Superstars in the National Basketball Association: Economic Value and Policy," Journal of Labor Economics, University of Chicago Press, vol. 15(4), pages 586-624, October.
    Full references (including those not matched with items on IDEAS)

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