Miquel Carreras and Jaume Garcia

The recently signed TV deals by the English Premier League and LaLiga imply that income from TV rights are expected to increase significantly in both football championships. We analyzed the impact of these revenue increases in terms of the effect on financial inequality. We conclude, and provide empirical evidence, that the expected financial imbalance between clubs will suffer an increase in absolute terms, but a decrease in relative terms for both competitions. The aim of this paper is to measure the effect of the new TV deals on the competitive balance of these championships. We...Read more

Vincent Hogan and Patrick Massey

We present evidence on the impact of revenue sharing and salary caps on both short- and long-run competitive balance based on a form of unique natural experiment—the abolition of Rugby Union’s ban on professionalism and the different responses of the English (EPR) and French (T14) leagues to its removal. The EPR has operated revenue sharing and a binding salary cap for most of the professional era, but the T14 only introduced a non-binding salary cap much more recently. We use a dataset of net winning margins from 9,438 matches in both leagues over 27 seasons from 1987/88 to 2015/16 to...Read more

Oliver Budzinski and Tim Pawlowski

Despite the prominence and relevance of the uncertainty-of-outcome hypothesis (UOH) for professional sports worldwide, decades of empirical research have not been successful in establishing clear evidence for the importance of outcome uncertainty for stadium attendance and TV audience. In this regard, some recent papers were developed drawing upon a body of behavioral economic thoughts that might help to better understand the divergence between the UOH, competitive balance, and consumer choices. Since this literature has so far focused on different facets of behavioral economics, it is the...Read more

Helmut M. Dietl
Markus Lang
and Cornel Nesseler

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 profits and welfare increase for both clubs. If the small-market club is subsidized, a small subsidy increases competitive balance and player...Read more

Mickael Terrien
Nicolas Scelles
and Christophe Durand

This paper analyzes the impact of the French 75% income tax rate on the attractiveness of the French soccer league. The concerns are less about its financial implications for clubs than about the possible decrease in its attractiveness. A classical model of professional team sport leagues is employed to measure the Nash equilibrium competitive balance and the stock of talent to assess the effect of the new taxation. We then propose two hypotheses corresponding to specific situations in the French soccer league: “social and fiscal disparities between clubs” and “sugar daddy” behavior. The...Read more

Wayne McEwan
Neil E. Metz

The notion of competitive balance (CB) is a central issue common to all sports leagues. Economists, fans, players, owners, and even league commissioners are all concerned with competitive balance and its impact on the demand for their sport, league, and team. Economists have noted the importance of team parity on league success for quite some time (Rottenberg 1956). Closer competitions lead to greater excitement, which increases demand for teams and the league. Given its importance, many leagues have implemented policies such as salary caps, luxury taxes, revenue sharing, and drafts in an...Read more

Egon Franck

The new UEFA Club Licensing and Financial Fair Play Regulations have encountered stiff criticism. The concerns are that the new regulations may harm football in three different ways: By forgoing the potential benefits from substantial injections of “external” money into payrolls, by restricting competition in the player market without at the same time achieving benefits from more balanced competition, and by creating some sort of barrier to entry which could “freeze” the current hierarchy of clubs. It is the purpose of this paper to take these concerns as a starting point for discussing...Read more

Tim Pawlowski
Oliver Budzinski

Ever since the pioneering work of Rottenberg (1956) and Neale (1964), the uncertainty of outcome hypothesis (UOH) has played a major role in the economic analysis of professional sport leagues. However, decades of empirical research have not been successful in establishing clear evidence for the importance of competitive balance (CB) for attendance or TV viewers in European professional football. In order to find possible reasons for the gap between the UOH and (the lack of) its empirical validation, our paper adopts a stated preference approach focused on the fans’ perception of CB and...Read more

Nicholas M. Watanabe

While much of the focus on professional sport is divided between North America and Europe, there is a growing need to analyze sport leagues and organizations outside of these two regions. In this paper, the J-League, Japan’s top flight professional soccer league, is the focus of examination through a seasonal attendance model which seeks to test the importance of region and competitive balance in determining demand for attendance. The results of this model indicate that fans are sensitive to competitive balance, confirming the uncertainty of outcome hypothesis. Furthermore, this paper...Read more

Neil Longley

This paper analyzes the impact of the NHL’s participation in the Winter Olympics on competitive balance outcomes within the NHL. It finds that the post-Olympic performance of NHL teams is negatively related to the number of players that the team supplied to the various Olympic rosters. This is consistent with a notion that participating in the Olympics can induce greater fatigue in players, thereby reducing their effectiveness upon their return to their domestic clubs. This effect was found to be particularly strong for players representing the host country at the Olympics.Read more

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