Helmut M. Dietl
Markus Lang
Stephan Werner

This paper presents a model of a professional sports league and analyzes the effect of luxury taxes on competitive balance, club profits, and social welfare. It shows that a luxury tax increases aggregate salary payments in the league and produces a more balanced league. Moreover, a higher tax rate increases the profits of large-market clubs, whereas the profits of small-market clubs only increase if the tax rate is not set inadequately high. Finally, we show that social welfare increases with a luxury tax.Read more

Brian P. Soebbing

Competitive balance research partitions into two areas: analyzing sports policy and its effect on competitive balance and the uncertainty of outcome hypothesis. This paper examines the latter section. No formal analysis of the relationship between competitive balance and regular season average attendance in Major League Baseball (MLB) using the actual to idealized standard deviation ratio exits. This paper examines the effect that competitive balance has on MLB attendance between the seasons 1920 and 2006. Additionally, this paper incorporates a games-behind variable to examine if fans are...Read more

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