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The Impact of Government Subsidies in Professional Team Sports Leagues

Author

Listed:
  • Helmut Dietl

    (Department of Business Administration, University of Zurich)

  • Markus Lang

    (Department of Business Administration, University of Zurich)

  • Cornel Nesseler

    (Department of Business Administration, University of Zurich)

Abstract

This article develops a game-theoretical model to analyze the effect of subsidies on player salaries, competitive balance, club profits, and welfare. Within this model, fan demand depends on win percentage, competitive balance, and aggregate talent. The results show that if a large market club receives a subsidy and fans have a relatively strong preference for aggregate talent, compared to competitive balance and own team winning percentage, club rofits and welfare increase for both clubs. If the small-market club is subsidized, a small subsidy increases competitive balance and player salaries of both clubs.

Suggested Citation

  • Helmut Dietl & Markus Lang & Cornel Nesseler, 2017. "The Impact of Government Subsidies in Professional Team Sports Leagues," Working Papers 366, University of Zurich, Department of Business Administration (IBW).
    • Handle: RePEc:zrh:wpaper:366
    as

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    File URL: http://repec.business.uzh.ch/RePEc/zrh/wpaper/366_IBW_full.pdf
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    References listed on IDEAS

    as
    1. Markus Lang & Martin Grossmann & Philipp Theiler, 2011. "The Sugar Daddy Game: How Wealthy Investors Change Competition in Professional Team Sports," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(4), pages 557-577, December.
    2. Helmut M. Dietl & Markus Lang & Stephan Werner, 2009. "Social Welfare in Sports Leagues with Profit‐Maximizing and/or Win‐Maximizing Clubs," Southern Economic Journal, John Wiley & Sons, vol. 76(2), pages 375-396, October.
    3. Madden, Paul, 2012. "Fan welfare maximization as a club objective in a professional sports league," European Economic Review, Elsevier, vol. 56(3), pages 560-578.
    4. Sonia Falconieri & Frédéric Palomino & József Sákovics, 2004. "Collective Versus Individual Sale of Television Rights in League Sports," Journal of the European Economic Association, MIT Press, vol. 2(5), pages 833-862, September.
    5. 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.
    6. Dietl Helmut M & Lang Markus & Rathke Alexander, 2009. "The Effect of Salary Caps in Professional Team Sports on Social Welfare," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-23, April.
    7. John Vrooman, 2007. "Theory Of The Beautiful Game: The Unification Of European Football," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(3), pages 314-354, July.
    8. Helmut M. Dietl & Markus Lang & Stephan Werner, 2009. "Social Welfare in Sports Leagues with Profit-Maximizing and/or Win-Maximizing Clubs," Southern Economic Journal, John Wiley & Sons, vol. 76(2), pages 375-396, October.
    9. 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.
    10. James Alm & William H. Kaempfer & Edward Batte Sennoga, 2012. "Baseball Salaries and Income Taxes: The "Home Field Advantage" of Income Taxes on Free Agent Salaries," Working Papers 1209, Tulane University, Department of Economics.
    11. Paul Madden, 2011. "Game Theoretic Analysis of Basic Team Sports Leagues," Journal of Sports Economics, , vol. 12(4), pages 407-431, August.
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    Citations

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    Cited by:

    1. Thadeu Gasparetto & Angel Barajas, 2020. "Management in a complex scenario: World Cup, alternative stadiums and demand for tickets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(6), pages 1071-1083, September.
    2. Iuliia Naidenova & Cornel Nesseler & Petr Parshakov & Aleksei Chusovliankin, 2020. "After the Crimea crisis: Employee discrimination in Russia and Ukraine," PLOS ONE, Public Library of Science, vol. 15(10), pages 1-17, October.
    3. Gomez-Gonzalez, Carlos & Dietl, Helmut & Nesseler, Cornel, 2019. "Does performance justify the underrepresentation of women coaches? Evidence from professional women’s soccer," Sport Management Review, Elsevier, vol. 22(5), pages 640-651.

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    More about this item

    Keywords

    Subsidy; team sports; competitive balance; social welfare;
    All these keywords.

    JEL classification:

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

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