Book Review: Economics, Uncertainty, and European Football, by Loek Groot, pp. 177-179

Arne Feddersen

One of the central particularities in sports leagues is the fact that the clubs compete with each other on the input markets but are obliged to cooperate on the output market (i.e., the league¡¯s games). In order to maximize jointly produced league output, one often hears calls for policy changes to ensure optimal competitive balance in leagues. Supporters of these policy changes often argue that the dominance of one, or a few, teams will lead to unequal revenues across clubs, consolidation of the clubs¡¯ level of relative sporting performance, and thus to a helix of sporting and economic success. At the end of this process stands a loss in attractiveness of the league and hence a loss of revenues for all clubs and the league as a whole. In the extreme case, the existence of the league will be endangered. In order to avoid this spiral, many sports leagues have created rules and instruments to provide for financial and/or competitive balance across individual teams. These include the sharing of revenues, reserve clauses and/or drafting systems, and salary caps with the aim of maintaining the uncertainty of outcome that is seen to be substantial for fan interest.