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Revenue Sharing and Owner Profits in Professional Team Sports

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  • Stefan Kesenne

    (University of Antwerp, University of Leuven)

Abstract

In the sports economics literature, little attention has been paid to the impact of revenue sharing on club owners' profits. In particular, it is unclear how the profits of the large-budget clubs are affected. In this article, the relationship between one specific revenue-sharing arrangement and owner profits is investigated for clubs in a profit-maximization league using two different models. In a Walrasian equilibrium model, revenue sharing will lower profits, whatever the value of the share parameter, if the profits of a large-budget club are higher than the average club budget in the league. In a noncooperative Nash equilibrium model, the impact turns out to be theoretically indeterminate.

Suggested Citation

  • Stefan Kesenne, 2007. "Revenue Sharing and Owner Profits in Professional Team Sports," Journal of Sports Economics, , vol. 8(5), pages 519-529, October.
    • Handle: RePEc:sae:jospec:v:8:y:2007:i:5:p:519-529
    DOI: 10.1177/1527002506294942
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    References listed on IDEAS

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    1. Jeffery Borland, 2003. "Demand for Sport," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(4), pages 478-502, Winter.
    2. Simon Rottenberg, 1956. "The Baseball Players' Labor Market," Journal of Political Economy, University of Chicago Press, vol. 64(3), pages 242-242.
    3. Stefan Szymanski & Stefan Késenne, 2010. "Competitive Balance and Gate Revenue Sharing in Team Sports," Palgrave Macmillan Books, in: The Comparative Economics of Sport, chapter 7, pages 229-243, Palgrave Macmillan.
    4. Daniel R. Marburger, 1997. "Gate Revenue Sharing And Luxury Taxes In Professional Sports," Contemporary Economic Policy, Western Economic Association International, vol. 15(2), pages 114-123, April.
    5. 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.
    6. 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..
    7. Stefan Szymanski, 2010. "The Economic Design of Sporting Contests," Palgrave Macmillan Books, in: The Comparative Economics of Sport, chapter 1, pages 1-78, Palgrave Macmillan.
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    Cited by:

    1. Miceli, Thomas J., 2024. "Patent races and pennant races: A new rationale for revenue sharing in sports leagues," Economics Letters, Elsevier, vol. 234(C).
    2. Rockerbie, Duane & Easton, Stephen, 2017. "Risk Diversification from Revenue Sharing in a Professional Sports League: Measuring Welfare Gains," MPRA Paper 77431, University Library of Munich, Germany.
    3. Rockerbie, Duane & Easton, Stephen, 2017. "Revenue Sharing in Professional Sports Leagues as a Hedge for Exchange Rate Risk," MPRA Paper 77428, University Library of Munich, Germany.
    4. Peter Sloane, 2014. "Club objectives," Chapters, in: John Goddard & Peter Sloane (ed.), Handbook on the Economics of Professional Football, chapter 1, pages 13-22, Edward Elgar Publishing.
    5. Duane Rockerbie & Stephen Easton, 2018. "Revenue Sharing in Major League Baseball: The Moments That Meant so Much," IJFS, MDPI, vol. 6(3), pages 1-16, August.
    6. Peter J. Sloane, 2015. "The Economics of Professional Football Revisited," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(1), pages 1-7, February.
    7. Thomas Peeters, 2015. "Profit-Maximizing Gate Revenue Sharing In Sports Leagues," Economic Inquiry, Western Economic Association International, vol. 53(2), pages 1275-1291, April.

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    More about this item

    Keywords

    professional team sports; profit maximization; revenue sharing; owner profits; Walras equilibrium; Nash equilibrium;
    All these keywords.

    JEL classification:

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

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