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

Professional sports leagues that feature teams in different countries with different currencies are exposed to exchange rate uncertainty and risk. This is particularly evident for three professional sports leagues that feature teams in the United States and Cana-da. We construct a simple model of a profit-maximizing team that earns its revenue in one currency and meets its payroll obligations in a second currency and participates in a league-imposed revenue-sharing plan. Team profit can increase or decrease due to movements in the exchange rate based on a simple condition. Revenue sharing...Read more

In late 2011, at a time when other leagues such as the National Football League and the National Basketball Association had engaged in work stoppages, Major League Baseball owners and the MLB Players Association harmoniously agreed on a new five-year collective bargaining agreement. This article focuses on the reasons why MLB as an industry has maintained labor peace after decades of work stoppages. The primary aspects of the new MLB CBA, such as changes to the revenue sharing system, competitive balance tax, salary arbitration, and the amateur draft are addressed. The manner in which...Read more

This paper examines the economic issues leading up to the 2011 NFL lockout and the resultant Collective Bargaining Agreement with the NFLPA. The history of labor relations between the league and the union is presented. The league’s antitrust situation that led up to the 1993 CBA is discussed in detail, along with the economic consequences of that agreement and its successors through 2006. The issues dividing the players and the league in the wake of the 2006 CBA are discussed. The key events during the 2011 lockout and the details of the 2011-2020 CBA are provided.Read more

In this theoretical analysis, we try to find out what the impact is of pooling and sharing, and not just the sharing of broadcast rights, on the competitive balance in a sports league. We are using a simplified 2-club non-cooperative Nash equilibrium model with the hiring of talent as the only decision variable. The conclusion is that the individual sale of broadcast rights, combined with a pure performance-related sharing arrangement of the money, offers the best guarantee for an improvement of the competitive balance.Read more