FiT Publishing

Revenue sharing is a pervasive policy in professional sports leagues. While it is usually justified as promoting competitive balance, previous work has shown that it actually worsens balance in models where equilibrium outcomes are determined by contest success functions and when the league’s goal is to maximize aggregate revenue. This paper offers an alternative justification for revenue sharing in such settings—namely, to balance two offsetting externalities: the “rent-seeking externality” and the “spillover externality.” The first reflects the “race” to be first, and the second captures...Read more

This study aims to analyze fans’ demand for live football matches in the German 2. Bundesliga, focusing on match-outcome uncertainty. To examine the decision to attend sporting events, a fixed effects regression and the Tobit model were used to test the uncertainty of game outcomes and reference-dependent preferences with loss aversion. The estimated fans’ demand for attending live football matches is represented by the logged attendance of 2,442 matches from the 2010/2011 to the 2017/2018 seasons of the 2. Bundesliga. Our findings indicate that fans prefer certain game outcomes over...Read more

This paper illustrates the value of using betting data to simulate an ex-ante distribution of league-point outcomes for English professional association football. Competition in the three tiers of the English Football League (EFL) is much more balanced than in the English Premier League (EPL). The competition at the top of the tables is more concentrated than at the bottom of the tables. Clubs relegated into a lower league tend to perform well the next season. Still, this effect does not seem to be impacted by parachute payments given to those relegated from the EPL into the second...Read more

The evolution of competitive balance and its impact on demand is the focus in the field of sports economics. The results of previous studies examining the relationship between competitive balance (CB) and attendance, as well as the direction of the relationship between financial inequality and CB, are not clear. Through panel data of the top five European football leagues, we examine whether there is a causal relationship between the concentration of club wealth and CB. Using different CB measures and the player value concentration as a proxy for wealth concentration, we found that wealth...Read more

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

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

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

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

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

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