IDEAS home Printed from https://ideas.repec.org/p/tiu/tiutis/de46082b-0d40-4359-8f6f-fe402b3f0364.html
   My bibliography  Save this paper

The Sport League's Dilemma : Competitive Balance versus Incentives to Win

Author

Listed:
  • Palomino, F.A.

    (Tilburg University, School of Economics and Management)

  • Rigotti, L.

    (Tilburg University, School of Economics and Management)

Abstract

We analyze a dynamic model of strategic interaction between a professional sport league that organizes a tournament, the teams competing to win it, and the broadcasters paying for the rights to televise it. Teams and broadcasters maximize expected profits, while the league's objective may be either to maximize the demand for the sport or to maximize the teams' joint profits. Demand depends positively on symmetry among teams (competitive balance) and how aggressively teams try to win (incentives to win). Revenue sharing increases competitive balance but decreases incentives to win. Under demand maximization, a performance-based reward scheme (used by European sport leagues) may be optimal. Under joint profit maximization, full revenue sharing (used by many US leagues) is always optimal. These results reflect institutional differences among European and American sports leagues.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Palomino, F.A. & Rigotti, L., 2000. "The Sport League's Dilemma : Competitive Balance versus Incentives to Win," Other publications TiSEM de46082b-0d40-4359-8f6f-f, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:de46082b-0d40-4359-8f6f-fe402b3f0364
    as

    Download full text from publisher

    File URL: https://repository.tilburguniversity.edu/bitstreams/9c81459e-4b48-4778-9307-95e68540e11d/download
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Scott E. Atkinson & Linda R. Stanley & John Tschirhart, 1988. "Revenue Sharing as an Incentive in an Agency Problem: An example from the National Football League," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 27-43, Spring.
    2. 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.
    3. Frederic Palomino & Jozsef Sakovics, 2000. "Revenue sharing in professional sports leagues: for the sake of competitive balance or as a result of monopsony power?," Edinburgh School of Economics Discussion Paper Series 59, Edinburgh School of Economics, University of Edinburgh.
    4. Stefan Szymanski & Ron Smith, 2010. "The English Football Industry: Profit, Performance and Industrial Structure," Palgrave Macmillan Books, in: Football Economics and Policy, chapter 1, pages 1-26, Palgrave Macmillan.
    5. Scully, Gerald W., 1995. "The Market Structure of Sports," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226743950.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Falconieri, S. & Palomino, F.A. & Sakovics, J., 2002. "Collective vs Individual Sale of TV Rights in League Sports," Other publications TiSEM 922950b4-a0c9-4c2f-9cc8-c, Tilburg University, School of Economics and Management.
    2. Eberhard Feess & Frank Stähler, 2009. "Revenue Sharing In Professional Sports Leagues," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(2), pages 255-265, May.
    3. Giorgo Sertsios, 2007. "¿Puede el Diseño de un Torneo Deportivo Afectar su Asistencia?," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 44(129), pages 59-89.
    4. Nicola Giocoli, 2007. "Competitive balance in football leagues when teams have different goals," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 54(3), pages 345-370, September.
    5. William Chan & Pascal Courty & Li Hao, 2009. "Suspense: Dynamic Incentives in Sports Contests," Economic Journal, Royal Economic Society, vol. 119(534), pages 24-46, January.
    6. Dong, Zhi-Long & Ribeiro, Celso C. & Xu, Fengmin & Zamora, Ailec & Ma, Yujie & Jing, Kui, 2023. "Dynamic scheduling of e-sports tournaments," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 169(C).
    7. Michel Cavagnac, 2009. "Revenue Sharing and Competitive Balance When Teams are not Wage Takers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(3), pages 299-313, November.
    8. Pelnar, Gregory, 2007. "Antitrust Analysis of Sports Leagues," MPRA Paper 5382, University Library of Munich, Germany.
    9. Dmitry Dagaev & Alex Suzdaltsev, 2018. "Competitive intensity and quality maximizing seedings in knock-out tournaments," Journal of Combinatorial Optimization, Springer, vol. 35(1), pages 170-188, January.
    10. Matthias Kräkel, 2007. "A Note on Revenue Sharing in Sports Leagues," Journal of Sports Economics, , vol. 8(3), pages 309-316, June.
    11. Paolo Di Betta & Carlo Amenta, 2012. "The Media as a Policy Instrument in Influencing the Business Model of Professional Soccer: Evidence From Italy," Journal of Media Economics, Taylor & Francis Journals, vol. 25(2), pages 109-129, January.
    12. Mattera, Raffaele, 2017. "Motivation, workout and performance - a model for amatorial sports," MPRA Paper 79243, University Library of Munich, Germany.
    13. Stephen Easton & Duane Rockerbie, 2003. "Revenue Sharing, Conjectures, and Scarce Talent in a Model of a Professional Sports League," Industrial Organization 0303010, University Library of Munich, Germany.
    14. Paolo Di Betta & Carlo Amenta, 2010. "A die-hard aristocracy: competitive balance in Italian soccer, 1929-2009," Rivista di Diritto ed Economia dello Sport, Centro di diritto e business dello Sport, vol. 6(2), pages 13-40, Settembre.
    15. Barajas, Angel & Crolley, Liz, 2005. "A model to explain support in Spanish football," MPRA Paper 3235, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Palomino, Frederic & Sakovics, Jozsef, 2004. "Inter-league competition for talent vs. competitive balance," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 783-797, June.
    2. 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.
    3. Stefan Kesenne, 2000. "Revenue Sharing and Competitive Balance in Professional Team Sports," Journal of Sports Economics, , vol. 1(1), pages 56-65, February.
    4. 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.
    5. Pelnar, Gregory, 2007. "Antitrust Analysis of Sports Leagues," MPRA Paper 5382, University Library of Munich, Germany.
    6. Stefan KÉsenne, 2004. "Competitive Balance and Revenue Sharing," Journal of Sports Economics, , vol. 5(2), pages 206-212, May.
    7. Stefan Szymanski, 2010. "A Market Test for Discrimination in the English Professional Soccer Leagues," Palgrave Macmillan Books, in: Football Economics and Policy, chapter 6, pages 136-150, Palgrave Macmillan.
    8. Szymanski, Stefan & Wilkinson, Guy, 2016. "Testing the O-Ring theory using data from the English Premier League," Research in Economics, Elsevier, vol. 70(3), pages 468-481.
    9. Palomino, F.A. & Sakovics, J., 2000. "Revenue Sharing in Professional Sports Leagues : For the Sake of Competitive Balance or as a Result of Monopsony Power?," Discussion Paper 2000-110, Tilburg University, Center for Economic Research.
    10. Jeffrey G. Owen, 2003. "The Stadium Game," Journal of Sports Economics, , vol. 4(3), pages 183-202, August.
    11. Peter Dawson & Stephen Dobson & Bill Gerrard, 2000. "Estimating Coaching Efficiency in Professional Team Sports: Evidence from English Association Football," Scottish Journal of Political Economy, Scottish Economic Society, vol. 47(4), pages 399-421, September.
    12. Stefan Szymanski, 2013. "Wages, transfers and the variation of team performance in the English Premier League," Chapters, in: Plácido Rodríguez & Stefan Késenne & Jaume García (ed.), The Econometrics of Sport, chapter 3, pages 53-62, Edward Elgar Publishing.
    13. Wladimir Andreff, 2009. "Équilibre compétitif et contrainte budgétaire dans une ligue de sport professionnel," Revue économique, Presses de Sciences-Po, vol. 60(3), pages 591-633.
    14. Matthieu Llorca & Thierry Teste, 2016. "Dépenses salariales et performance dans l’industrie du football," Revue française d'économie, Presses de Sciences-Po, vol. 0(2), pages 125-145.
    15. Pedro Garcia-del-Barrio & Stefan Szymanski, 2009. "Goal! Profit Maximization Versus Win Maximization in Soccer," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(1), pages 45-68, February.
    16. Fort, Rodney & Maxcy, Joel & Diehl, Mark, 2016. "Uncertainty by regulation: Rottenberg׳s invariance principle," Research in Economics, Elsevier, vol. 70(3), pages 454-467.
    17. Martin Grossmann & Helmut Dietl & Markus Lang, 2010. "Revenue Sharing and Competitive Balance in a Dynamic Contest Model," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(1), pages 17-36, February.
    18. Markus LANG & Alexander RATHKE & Marco RUNKEL, 2010. "The Economic Consequences Of Foreigner Rules In National Sports Leagues," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 31, pages 47-64.
    19. Carlo Bellavite Pellegrini & Raul Caruso & Marco Di Domizio, 2021. "Relative wages, payroll structure and performance in soccer. Evidence from Italian Serie A (2007-2019)," DISCE - Working Papers del Dipartimento di Politica Economica dipe0015, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    20. Sonia Falconieri & Frederic Palomino & Jozsef Sakovics, 2002. "Collective vs. Individual Sale of TV Rights in League Sports," Edinburgh School of Economics Discussion Paper Series 85, Edinburgh School of Economics, University of Edinburgh.

    More about this item

    JEL classification:

    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tiu:tiutis:de46082b-0d40-4359-8f6f-fe402b3f0364. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Richard Broekman (email available below). General contact details of provider: https://www.tilburguniversity.edu/about/schools/economics-and-management/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.