Competitive balance and gate revenue sharing in team sports

Abstract

This paper shows that under reasonable conditions, increasing gate revenue sharing among teams in a sports league will produce a more uneven contest, i.e. reduce competitive balance. This result has significant implications for antitrust authorities and legislators, who have tended to assume that revenue sharing arrangements will necessarily promote competitive balance.

Competitive Balance and Consumer Demand in the English Football League

“…Kesenne (Kesenne, 2006) develops models that indicate the effect of revenue sharing on competitive balance depends on the objective -wins or profits. Szymanski and Kesenne (Szymanski and Kesenne, 2004), Grossmann, Dietl and Lang (Grossmann, Dietl and Lang, 2010) and Runkel (Runkel, 2011) all develop models where revenue sharing does not increase competitive balance.…”

Theory of the Perfect Game: Competitive Balance in Monopoly Sports Leagues

“…European theorists (Szymanski 2003(Szymanski , 2004Szymanski and Kesenne 2004) have used non-cooperative game theory to show that the invariance proposition does not hold in open markets of European football, and that revenue sharing leads to less competitive balance. The open market distinction may not make any difference in the end, however, because both open and closed labor market models are based on assumptions that owners are profit maximizers.…”

Sports Really are Different: The Contest Success Function and the Supply of Talent

“…More recently, Szymanski (2004), Szymanski and Kesenne (2004), and Easton and Rockerbie (2005) choose to apply a conjectures interpretation to dt j dt i , rather than the traditional TSE interpretation. They argue that dt 2 dt 1 = dt 1 dt 2 = 0 denotes "Nash conjectures"-each owner believes that his choice will have no effect on the choices of other owners in equilibrium.…”

“…In an equilibrium model of sports league outcomes, popularized by El-Hodiri and Quirk (1971), Fort and Quirk (1995), and Vrooman (1995), a very simple functional form is used to describe the CSF. A few recent papers use a more general functional form (Rascher 1997;Szymanski 2003Szymanski , 2004Szymanski and Kesenne 2004;Kesenne 2005Kesenne , 2006, but even this specification is restrictive, and its effects on MPT and MRPT have not been analyzed. This paper proceeds as follows: In the next section, the CSF is discussed in detail, especially the role of TSE in determining MPT and MRPT.…”